Russian authorities are currently discussing two different approaches to regulation of cryptocurrency and related activities. The Bank of Russia may seek to ban the purchase of crypto assets. However, lawmakers are continuing to work on rules that will allow mining, taxation, and exchange to legalize cryptocurrencies.
Russian officials debate alternative crypto regulations
Russian institutions, including its central bank and lower house, the State Duma are currently pondering how to manage the country’s expanding crypto space. Anatoly Aksakov (head of the Duma’s Financial Market Committee) revealed that officials are currently discussing “two diametrically opposed approaches” to regulation of cryptocurrency. These include a total ban or legalization.
Interfax reported that a high-ranking lawmaker stated that talks are centered on taxation and legal definitions of new financial instruments. These should be completed during the spring session in Russia so that Russia can have clear regulations for the 2023 year. Aksakov noted that the State Duma had already approved, on its first reading, a draft law regarding the taxation on cryptocurrencies.
The bill that recognizes digital currencies like bitcoin as property for tax purposes was submitted to the House a year ago. The initial approval of the draft was given by the deputies in January 2021,, when the law “On Digital Financial Assets” came into effect. Pavel Krasheninnikov (chair of the Duma Committee on Legislation) commented on the matter. He stated that Russia must legalize cryptocurrency before it can be taxed.
Anatoly Aksakov explained that some regulatory proposals are extremely strict and prohibit the ownership and acquisition of cryptocurrency. Another option is to allow the establishment of cryptocurrency exchanges, and to ensure that their operations are transparent to regulatory bodies. This will make it easier for Federal Tax Service to tax the transactions.
The growing industry of cryptocurrency mining in Russia is another area worth attention. Aksakov is a strong supporter of mining being registered as a business activity and taxing it accordingly. This would allow Russia to increase electricity rates for mining companies, which currently use subsidized energy at household price.
Bank of Russia wants to prohibit cryptocurrency investments
A media report revealed that the Central Bank of Russia will seek to ban cryptocurrency investments due to financial stability risks. These risks are growing with the widespread use of cryptocurrency transactions, according to CBR. This regulator is a strong opponent to legalizing cryptocurrency circulation in Russia. It often refers to assets like Bitcoin as “money surrogates” and their adoption as a method of payment.
Two sources in the Russian financial sector, quoted by Reuters, claim that the monetary authority is currently discussing a ban on new crypto asset purchases with market participants and experts. One source said that the restriction would not impact previous purchases if it was adopted. He spoke on condition of anonymity. Another source close to the CBR revealed that the current position of the central bank is one of “complete rejection of all cryptocurrencies.”
When asked for comment, Bank of Russia said that it is currently preparing an advisory report in order to express its position on the matter. However, they declined to go into detail. Russian media reports that a working group for cryptocurrency regulation will be established at the State Duma. It will meet in December and begin with the review of a CBR report.
The recently published Financial Stability Overview of the second and third quarter of 2021, Bank of Russia cited estimates from financial institutions that the annual volume of cryptocurrency transactions by Russian residents amounts at around $5 billion. According to the authority, cryptocurrency transactions “pose significant risks for investors and financial stability.”
What regulatory approach would you prefer Russia to take regarding cryptocurrencies? Please share your views on this topic in the comments section.
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