Russia authorities choose accommodative crypto “road map” over blanket ban

• A working group tasked by President Putin has developed a cryptocurrency “road map” to navigate the digital asset industry in Russia.
• The draft champions rules and regulations for the crypto space, rather than the central bank proposed China-like ban.

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Authorities in Russia have now drawn up a cryptocurrency “road map” to impose regulations on the crypto space by the end of the year. The strategy is more restrictive, as opposed to the blanket ban proposed by the nation’s central bank (CBR). It was developed by the finance, economy, digital and interior ministries, the Russian Federal Security Service (FSB), and the central bank, following a directive by President Vladimir Putin. 

In the road map, the group proposes the legalization of buying and selling of cryptocurrencies, but only by Russian banking organizations. Foreign crypto exchanges and peer-to-peer (P2P) platforms would have to register to operate in the country. Binance, the world’s largest exchange is already looking to bank on this opportunity.

Additionally, the draft suggests introducing know-your-customer (KYC) and anti-money laundering (AML) rules for crypto platforms. A supervisory body would ensure crypto firms are regulatory compliant, penalizing those who don’t play by the rules.

The Russia crypto road map

By May, the Ministry of Finance is expected to have developed a compliance control system for P2P platforms, the road map states. By November, the nation should adopt AML standards of the global Financial Action Task Force (FATF). By December, the nation should have come up with rules for registration and reporting by crypto platforms.

Moreover, there are plans for crypto firms and Russian citizens to start reporting their crypto holdings and transactions. Failure to do this would result in administrative and criminal punishment. The group also suggests developing a method for defining digital assets’ prices.

The publication proposes that compliance procedures become based on those employed by Swiss crypto startup Aximetria. The AML watchdog Rosfinmonitoring would trace all crypto transactions using a native tool called “Transparent Blockchain.”

According to Russian news agency RBK, Deputy Prime Minister Dmitry Chernyshenko has already signed the document. The central bank remains the sole dissenting voice on the same. For this reason, it has been assigned to study how China banned crypto.

CBR has been against crypto trading and mining on Russian grounds, citing financial instability, inefficient energy consumption, and environmental concerns. The bank gave the example of Kazakhstan which has had power outages attributed to crypto mining. However, Putin showered hope in this sector last week when he said the country has surplus electricity, giving it a “competitive advantage” in crypto mining.

Remarks

Credit rating agency Fitch Ratings is of the opinion that a ban would mitigate financial risk in Russia. However, such a move would choke innovation, and in the long run, hinder technological development in the nation’s banks. Telegram founder, Pavel Durov, echoed similar sentiments last week. He was supported by Russia’s opposition, Alexei Navalny, who said a complete crypto ban is “impossible.” 

Related: Russia’s crypto ban proposal can drive out country’s tech talent says Telegram’s Pavel Durov

Moreover, the Digital Ministry notes that Russia is home to many cryptocurrency projects. An outright ban on cryptocurrencies would therefore slacken developments in the nation’s IT industry. The Digital Ministry further calls on the prompt approval of the aforementioned draft.