Back to the list

What Course of Crypto Regulations Will Russia Take After Imposed Sanctions?

15 March 2022 14:45, UTC
Denis Goncharenko

After Russia-Ukraine conflict emerged, many crypto enthusiasts suggested that the strict regulations proposed by Russian central bank will not be accepted. Instead, many experts think that the regulations proposed by Ministry of Finance will be a better base for the industry which can help Russian economy under sanctions.

Russia's central bank has suggested a complete ban on all cryptocurrencies domestically. Economies, such as Russia, face more financial stability concerns from cryptocurrencies, according to the analysis. This is because of a lack of financial knowledge and a tendency to save in foreign currencies. According to the Bank of Russia, mining undermines Russia's green program, puts the country's energy supply at risk, and intensifies the negative consequences of the rise of cryptocurrencies by generating incentives for their circumvention.

Russian security services, which also support a domestic ban to prevent the currency from being used to finance the country's opposition, are in agreement with the central bank's firm stance against crypto.

A blanket ban was pushed by the FSB on Governor Elvira Nabiullina because Russians are increasingly using difficult-to-trace payments to donate to undesirable organizations. This includes media resources that have been labeled "foreign agents," according to people who asked to remain anonymous because the information is not publicly available. Many estimate that Russia's approximately 17 million cryptocurrency wallets, which contain more than 7 trillion rubles ($92 billion) in assets, are the principal depository for opposition and media funding. Nonetheless, the security services are worried that the situation is growing more serious.

Russia's Central Bank has been skeptical about cryptocurrencies since their creation and has proposed that they should be subject to more regulation. According to Nabiullina, who issued a warning in December, Russian infrastructure should not be used for the trading of cryptocurrency.

Requests for comment from the Financial Stability Board (FSB) were not returned. It is also worth mentioning that although China has declared crypto-related activities to be unlawful and has said that it intends to ban the mining of digital assets, Russia has emerged as a key mining center. Russia's northern and Siberian areas, which benefit from low temperatures and easy availability of energy, are home to the vast bulk of the country's largest cryptocurrency mining facilities.

Despite the fact that cryptocurrency is currently prohibited in Russia for financial transactions, legislation enacted in 2020 recognized the existence of cryptocurrencies as their popularity grew. According to the sources, Russians, unlike those in China, would be authorized to trade cryptocurrencies provided they had money in an offshore bank account, unlike those in China. It would be necessary for a ban to be adopted by the legislature before it could become effective.

It is also worth mentioning that the Federal Ministry of Business and Trade of the Russian government has released a new proposal that focuses on the cryptocurrency mining business.

As part of the proposal, Russia's Ministry of Energy proposes decreasing taxes on mining farms and data centers as well as lowering energy expenses in certain regions of the nation. The ministry, which intends to boost energy costs in response to an increase in energy use, is said to be considering imposing individual power usage restrictions on mining operations. The authorities have not yet established a threshold amount for this purpose.

The Russian government is still discussing how to regulate Bitcoin, and the present proposal is a consequence of this uncertainty in the country's policy. Russia's finance ministry has been advocating for cryptocurrency regulation, while the Bank of Russia has been adamant in its opposition, citing investor safety concerns as a reason for barring cryptocurrency transactions.

One of Russia's most important financial organizations, Sberbank, has reportedly shown support for the notion of regulating cryptocurrency trading rather than outright forbidding it.

"We agree with the government's view that cryptocurrencies should be regulated, not outlawed. AML [Anti-Money Laundering] systems and taxes must be considered in any policy that allows individuals and businesses to legitimately buy bitcoin”.

It seems that the more sanctions would be imposed on Russia and its officials and residents, the more likely that the crypto-friendly regulations would be accepted – the state is in a severe lack of financial liquidity and cryptocurrency might be the key as well.