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While many of the most bullish crypto investors have adopted the term “digital assets,” Russia isn’t shying away from the industry’s origins. Authorities have recently agreed to recognize cryptocurrencies as “currencies straightforwardly”. That said, it will regulate these cryptos in a rigorous manner intended to weed out criminal activity in the space.
The regulatory decision may come as a surprise to outsiders. El Salvador is the only country to recognize Bitcoin as a national “currency” to date. Even Western nations have hesitated to classify cryptocurrencies as anything more than assets or securities. Meanwhile, China has predictably banned everything from Bitcoin and cryptocurrency from its borders, with mining the first to go.
So what makes Russia so relatively accommodative? According to local newspaper Kommersant, the agreement compromises the government and central bank’s preferred regulatory approaches to crypto.
On the one hand, President Putin and the Ministry of Finance have repeatedly shown support for mining Bitcoin in Russia. But, on the other hand, the former has specifically called crypto a “legitimate means of payment”.
On the other hand, the nation’s central bank considered a total ban on crypto investments just two months ago. Like other crypto hawks, the Bank of Russia showed concerns about economic stability and money laundering.
In balancing these views, the new regime around crypto will contain a significant catch. While the Russian Federation plans to recognize cryptocurrencies as “a close analog for foreign currency”, all transactions must occur within the legacy financial system’s purview.
“Their circulation in the legal sector will be possible only with full identification, through the banking system or licensed intermediaries,” reported Kommersant.
Under this rule, crypto transactions of over 600 rubles must also be declared and reported to the government. Failure to do so will be considered a criminal offense, and it will push fines on people receiving such illegal payments.
What’s The Difference?
One of the oft-cited benefits of cryptocurrencies is that they need no intermediaries or monitors to facilitate transactions. However, a law requiring all transactions to be vetted and approved by licensed banks arguably removes most of the benefit that cryptos can provide as a means of payment.
However, Bitcoin mining has been exempt from criminal charges or aggravating circumstances under the criminal code and is left unaffected by the changes.
The law is expected to be drafted on February 18th, but not until late 2022.