Russian Finance Ministry submits crypto regulatory framework for review

Published at: Jan. 27, 2022

In a new twist of the Russian crypto regulation saga, the country's Ministry of Finance has come forward with an initiative that stands in stark contrast with the Central Bank's hardline position.

The Central Bank of Russia recently called for a ban on crypto trading and mining activities throughout the country. Citing volatility, environmental impact, and use in illegal activities, the central bank published a report calling regulators to implement a total ban and impose strict sanctions on violators.

However, the proposal received opposition from the Russian Ministry of Finance. A few days after the central bank's call for a ban, Ivan Chebeskov, an official from the ministry, stated that the government should regulate crypto instead of banning it entirely. Chebeskov said that the authorities should provide an opportunity for the industry to develop and that a complete ban may result in Russia falling behind on the technology.

Today, RBC reported that the ministry has sent a letter to Dmitry Chernyshenko, the Deputy Chairman of the Government of the Russian Federation, and officially submitted a regulatory proposal to the government. The proposal introduces a new framework for crypto use in the country that suggests that crypto operations be done within the traditional banking infrastructure, with mechanisms in place to identify traders’ personal data.

According to the ministry, regulating crypto can bring multiple benefits such as increased tax revenue and enhancing law enforcement's ability to track criminal activity.

The ministry cites statistics showing that Russian citizens are holding crypto that’s worth around 2 trillion Russian rubles, adding that a total ban or a lack of regulation will eventually undermine the industry and create a black market.

Telegram founder Pavel Durov also reacted negatively to the proposed ban on crypto. The tech executive expressed that a ban may not stop “unscrupulous players,” but will affect compliant and legal blockchain projects. He adds that a ban will delay the development of blockchain-based technologies.

Meanwhile, Russian President Vladimir Putin highlighted some benefits to crypto in a meeting with government officials. “We also have certain competitive advantages here, especially in the so-called mining,” Putin said. The president then called on the government and the central bank to reach a consensus on the matter.