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Russia to Recognize Crypto With Some Constraints

Russia is prepared to recognize digital assets as a form of currency according to local reports. Its new proposed bills are expected to pass on the 18th of February.

A thread by Kommersant on Twitter this morning reported that the Russian Ministry of Finance and its central bank have arrived at a conclusion on how cryptocurrencies will be regulated in the country. A draft, set to be established soon on the 18th of February 2022, is in the works. This draft will outline the premise of crypto as an ‘analog of currencies’, rather than a full-fledged financial tender. According to the proposed law, crypto will neither be fully integrated into the Russian financial system nor entirely recognized with the support of its banks.

Russia to Recognize Crypto as “Currency” But With Some Constraints

This information came shortly after Russia’s central bank proposed a blanket ban on crypto on the 20th of January 2022, citing that the volatility of crypto could be damaging to the stability of the country's financial system. In the same proposal, the Bank of Russia suggested that the support of financial institutions should be withdrawn from crypto-related transactions.

The Russian government released a circular titled “Concept for regulating the mechanism for organizing the circulation of digital currencies” after a meeting with Dmitry Grigorenko, the Deputy Prime Minister, Chief of Staff of the White House. Prior to this, in the summer of 2021, the White House held discussions concerning the state of digital assets in Russia. The Russian banks responded with a report pushing for the ban of crypto. However, the Russian government, specifically the Ministry of Finance, had a different disposition to how crypto should be handled in the country.

Till the draft law on regulating crypto is finalized, the Ministry of Finance and the Russian central bank will prepare a separate bill for conducting the country’s crypto-related financial affairs in the meantime. Information on presiding regulations for this transitory period was not disclosed in the proposal.

Proposed Sanctions to be Placed on Digital Assets in Russia

Russia’s government has taken extra caution with the adoption of digital currencies in an attempt to prevent the potential threats they pose on the economy by drafting an extensive set of rules. Here are a few of them:

Foreign crypto exchanges are expected to set up a branch in the territory of the Russian Federation before activity from Russian users will be permitted on their platform. The government also frowns on the exchange or conversion of digital currencies, through means besides native legal entities.

Exchanges will also be charged with the responsibility of warning investors and traders on the risks of acquiring and trading crypto. Additionally, Russian authorities intend to place limitations on the maximum amount of tradable crypto outside the purview of its legal sector. Transfers surpassing 600,000 rubles (~$8,000) will have to be declared to avoid being flagged as criminal activity.

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