The government of Russia plans to implement the law “On digital financial assets”, which introduces rules regarding concepts such as cryptocurrency, mining, tokens, smart contracts, and token release procedures. The law assumes that cryptocurrencies will not be legal tender in the territory of Russia, but the technology can be used by big businesses and assets can be traded.
By analogy with a similar law in Belarus, tokens can be exchanged for rubles only through special exchanges. In this case, tokens and cryptocurrencies will be considered property in Russia. Cryptocurrency mining becomes an entrepreneurial activity. Regulations on the purchase of cryptocurrency by civilians will be set by the Bank of Russia.
The latest version of the document does not answer the question of when cryptocurrencies will be fully legalised in Russia. The state has tried to mediate the risks associated with cryptocurrencies with regulations, but because of this, it leaves minimal opportunities for development. This therefore means crypto businesses are currently reluctant to move or expand operations to Russia.
VTB Bank is one of the leading universal banks in Russia. VTB Bank and its subsidiaries form a leading Russian financial group – VTB Group – offering a wide range of banking services and products in Russia, CIS, Europe, Asia, Africa, and the US.
The head of VTB Bank, Andrei Kostin, recently declared that he was not a supporter of the crypto industry, and called the mining of cryptocurrencies “some kind of counterfeiting”.
According to Mr Kostin, there was an initial euphoria with cryptocurrencies, and people began to think that “tomorrow everything will be calculated in cryptocurrency”, but that did not happen. The head of VTB Bank now believes that in the future, “there will remain a fairly narrow niche in which cryptocurrency will be used”.
Sberbank (formerly known as Sberbank of Russia) is a Russian state-owned bank founded in 1991 and headquartered in Moscow. Sberbank is the largest bank in Russia and Eastern Europe with total assets of $390 billion, 300,000 employees, and about 70,000 offices.
Herman Gref – CEO of Sberbank – is a blockchain and cryptocurrency enthusiast and has plans to implement the technologies into the banking system.
However, Sberbank has suspended its crypto-related plans due to the central bank’s negative stance on the industry.
Cryptocurrency in Russia
It should be noted that in January 2019, Valentina Matvienko, the chairman of the upper chamber of the Russian parliament, also urged MPs to speed up work on cryptocurrency-related bills.
According to statistics, in Russia, 78% of the digital currency market is made up of people under 35 years old.
This could be a reason for the slow progress of regulation surrounding cryptocurrency in Russia, because the people who are making the decisions probably have no idea how it works. The current bill demonstrates a lack of understanding of the core principles of financial cryptography.
A set of laws regulating digital financial assets including cryptocurrencies should foster the development of the digital economy in Russia. Russia has to move fast to attract fresh investments and prevent its weakening economy from collapsing into recession. That is where a blockchain and cryptocurrency-centered system of money may come in handy.
Russia has increased its focus on innovation lately. Several high-profile technology projects have sprung up in Skolkovo, which is becoming known as the ‘Russian Silicon Valley’, and confirms the pivot towards a new hi-tech economy.
A bet on blockchain-based assets also seems rational for the country. Digital currency would help enable Russia to better dodge Western sanctions and reduce its dependency on US dollars.
The government has been facing tough times trying to keep its economy afloat in the meantime. According to recent data, net capital outflow gained traction in 2018 and reached 46% year-over-year in January 2019.
The future of crypto in Russia
Anatoly Aksakov, chairman of the State Duma’s financial market committee, believes that crypto users should have a special “visa” to transfer money from accounts in Russian banks to digital financial assets. To get permission, you will need to pass identification procedures. At the moment, the identification procedure is not yet defined.
According to Aksakov, private crypto-tools that do not comply with Russian legislations will become illegal. The Ministry of Finance expressed the opinion that such a mechanism would help fight corruption and money laundering.
The future of cryptocurrency in Russia is extremely uncertain, since the digital currency has become a godsend not only for the adherents of the creation of a new economy, but also for fraudsters and criminals.
The timing of the adoption of the draft law “On digital financial assets” cannot be predicted due to the fact that “endless edits” are being made. The good news is that the Russian government wants to support the creation of pilot regions in which digital money businesses will be allowed.
There are companies in the Kaliningrad region and Tatarstan that are willing to participate in the experiment, but the main goal is big business. Any company that works with technologies such as blockchain, artificial intelligence, and neurotechnologies will be able to take part in the project. So it’s certainly better than nothing.
It’s surely only a matter of time until cryptocurrency laws in Russia are ironed out to help businesses circumvent sanctions and begin work on developing the technology.
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