- On July 24, the Russian Government passed the new federal law to regulate relations arising from the issuance, accounting and circulation of virtual financial assets.
- In Russia, the amount of cryptocurrency flowing into dark markets like illegal drug and weapons trafficking have doubled for the first time in 4 years, a news report revealed.
Earlier this April, Anatoly Aksakov, Chairman of the State Duma Committee, announced that efforts on drafting the bill “On Digital Financial Assets” is completed. Following this, on July 24, the Russian Government passed the new federal law to regulate relations arising from the issuance, accounting and circulation of virtual financial assets.
This law enables cryptocurrencies to have a legal status but stops them from being used to pay for goods and services. In addition to it, In 2021, it will be possible to conduct transactions with cryptocurrency in Russia.
The Principal Reason
In Russia, the amount of cryptocurrency flowing into dark markets like illegal drug and weapons trafficking have doubled for the first time in 4 years, a news report revealed. There are many cases of cryptocurrency theft, hacking and money laundering reported in Russia. The Russian Federal Security Service was apparently involved in the disappearance of $450 million in cryptocurrency from Wex, an offshoot of BTC-e. Similarly, A Russian hacker virus was found on employee computers at Tokyo based Coincheck exchange which resulted in the loss of $530 million, the biggest ever theft from a cryptocurrency exchange.
Russia had updated anti-bribery and AML laws to aid its expansion of the digital economy while reducing the risks of corruption associated with it.The Government also planned to punish companies that issue or operate virtual currencies without approval from the Russian central bank. Prior to this law, Russian Government proposed a bill which criminalises buying Bitcoin using money and people using it are sentenced to Jail. Many local lawyers feared that this law when enforced will paralyze the crypto world.
Hence, Russia is making efforts to update its regulations concerning cryptocurrencies. Last year, the Russian Supreme court even made it clear that cryptocurrency theft is a criminal offense and it directed the Central Bank of Russia to make amendments regarding cryptocurrencies.
Start of a New Age in Crypto World
Under the law, it is not possible to use cryptocurrency as a means of payment while the cryptocurrencies will acquire the status of standard financial asset but in digital form. Moreover, the law specifies the activities of an operator in which digital assets are issued and the operator of digital assets exchange along with relations arising from circulation of digital currency in Russian Federation.
All the transactions will be made through specific digital financial asset exchange operators who are indicated by the Bank of Russia. Russian banks and exchanges will be able to open cryptocurrency exchanges when they register with the Central Bank. The Russian Central Bank believes that this law will allow conversion of traditional financial items into digital form while expanding alternatives to attract investments.
The Russian Bank has the right to determine the characteristics of Cryptocurrency Financial Asset (CFA) like unqualified investors can limit their investments in such assets.
The document defines digital financial assets as digital rights that can be issued, registered and circulated in an information system based on a distributed registry. People who registered as entrepreneurs and legal entities have rights to make records on the release of digital financial assets of the information system.
Russian’s regulations on cryptocurrency are quite similar to China where China launched its own cryptocurrency in April of this year. While Russia is not planning to launch its own cryptocurrency yet but Kremlin is making sure that there will be no anonymity or privacy in Russia.