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Russia Restricts Anonymous Cash Deposits to Online Wallets

The Russian Government has put strict limits on anonymous deposits made to online wallets. While it is not a complete ban, the initiative by lawmakers is promoted as a step to deter illegal activity such as money laundering and illicit drug transactions and could affect up to 10 million users.

The Russian Federation is imposing a limited ban on anonymous deposits to online wallets, not limited to the cryptocurrency industry. The move is a purported effort by Russia to curb illegal transactions pertaining to terror financing, drug trafficking, and money laundering.

Who will be affected?

According to Russian lawmakers, topping up anonymous wallets and some transport cards will now only be possible from a bank account, and not in cash.

Through services such as Kiwi, PayPal, Webmoney and Yandex, Moscow Region Strelka card online wallets are leveraged in Russia by around 10 million users who top up their accounts anonymously in cash.

Won’t Impact Crypto-Exchanges

The amendments that have come into force will not affect users of crypto-exchanges, said Dmitry Kirillov, Senior Lawyer of tax practice Bryan Cave Leighton Paisner (Russia) LLP, a teacher at Moscow Digital School.

The new Russian law deals with electronic money operators. By obligating top-ups to online wallets through the Bank of Russia — activities are better regulated by legislation.

Currently, International digital asset trading platforms are outside of such regulation and are not subject to new restrictions. But this may affect those who buy cryptocurrency, for example, through exchanges using ATMs.

Kirillov said, “The channels for crediting funds to accounts in such systems remain traditional, including cash deposits through ATMs or terminals of electronic payment systems. Russian banks and payment system operators will be obliged to comply with the new requirements and stop crediting cash from anonymous users through such channels.”

Russian economist, Antonina Levashenko also agreed that the new legislation will have little effect on the blockchain space.

Levashenko explained that the restrictions on depositing cash on anonymous e-wallets are related to strengthening standards in the field of combating money laundering — particularly due to the FATF reporting that Russia was vulnerable in the use of electronic money due to the risks of anonymity.

Levashenko said, “Will it affect cryptocurrencies? Currently, these changes have been implemented only in relation to electronic money in accordance with the amendments to the law on the national payment system.” She added, But in the near future, undoubtedly, yes. FATF standards are always applied to new technologies by analogy: if at first the standards were prescribed for classic bank accounts, then they were first extended to electronic wallets and prepaid cards, and then to virtual wallets for cryptocurrencies.”

Russian Citizen Use P2P to Escape Monolithic Banking

As reported by Blockchain.News, the Paxful peer-to-peer Bitcoin marketplace has recently released some important data regarding the use of its p2p trading platform in Russia. The study indicates a rising interest in the use of cryptocurrencies in the country. The research comes at an important time when the Russian government has been trying to make it even more difficult for citizens to use crypto assets.

Anton Kozlov, Paxful’s manager from the Russian market, said, “Crisis aside, Russia has always had a monolithic banking system that is dominated by a few players and the sentiment we get is that Russians are increasingly looking to find alternative ways to grow their earnings and participate in the financial markets. Bitcoin within the P2P context allows them much more freedom to do so—and out data is proving it.”

For several years, Russian lawmakers have been contemplating whether to legalize or ban cryptocurrencies. As a result, they created an atmosphere that has left the entire crypto industry in the nation in an uncertain state. Despite these hindrances, Russian users joining Paxful cryptocurrency exchange have risen by 350% over the last 12 months.

Bank of Russia Reveals the Possibility of Developing a CBDC in Public Consultation Report

The Bank of Russia released a public consultation report that detailed the country’s progressive strides with respect to its perspective on its Central Bank Digital Currency (CBDC) dubbed the ‘Digital Rubble’. Per the report, the Bank of Russia noted that the Russian economy is increasingly becoming digitized and as such has necessitated the need for advanced payment systems that are built on a government-backed digital currency.

The Bank of Russia revealed in the public consultation report that it is now considering the possibilities of issuing a Digital Rubble, a move that will trail one of its neighboring countries China.

“The emergence of new financial opportunities for citizens and businesses that meet the needs of the digital world increases the competitiveness of the entire economy. Therefore, the Bank of Russia, whose goals include the development of the national payment system, is exploring the possibilities of issuing the central bank digital currency (CBDC) – the digital ruble,” the report reads.

The digital Rubble as acknowledged by the bank will serve as a complement to the existing Fiat Rubble and it is expected to viable for use as a legal tender as well as finding use in digital financial instruments. The Bank of Russia however clarified that while it is still considering the feasibility of an issuing a Digital Rubble, it has not yet decided to do so.

Can a Digital Rubble Ease Russia’s Tight Grip on Crypto?

Russia is a country with somewhat conflicting regulations about cryptocurrencies. The passage of the State Duma digital financial assets (DFA) has opened speculations about the future of digital assets in the country.

Should a potential digital Rubble be launched by the Bank of Russia, expectations from the country’s past activities will see the country promulgate laws that will make the digital Rubble thrive but this may likely be at the expense of other crypto assets

Five Russian Banks Ready to Lead Russia's CBDC Pilot Test

Five Russian Banks have reportedly expressed their readiness to participate in the pilot test for the Bank of Russia’s proposed Digital Rubble following the release of its public consultation report. According to the local news agency Izvestia, The Bank of Russia will conduct an experiment on using the digital ruble for a limited circle of people after its ongoing public consultations and as early as in the first half of 2021.

With the entire payment and settlement landscape gradually being overhauled by the digital currencies, Central Banks around the world are intensifying their approach to launch their own CBDCs or the digital version of their fiat currency. As reported, the interest of five banks including MKB, PSB, Zenit, Dom.RF and the Crimean RNKB to help test out the proposed Digital Rubble ha been secured by the Bank of Russia.

According to Izvestia, the ‘Wallet’ for the proposed digital rubble will be a digital replica of bank cards and the success of the pilot tests with the five banks may involve the issuance of digital salaries. Just like the Bank of Japan, the Bank of Russia’s topmost intended use case for its CBDC is to overhaul the payment system.

CBDCs are Receiving Needed Acceleration

The Bank of Russia is not the only Central Bank in recent times to record a daily gain in momentum in relation to its CBDC plans. As a matter of fact, the Central Bank of the Bahamas has perfected its plans to launch its CBDC dubbed the Sand Dollar sometime next week, and also with an ambitious plan to deploy the digital currency beyond the shores of the Bahamas.

Other nations including China are also at the advanced stages of their CBDC testing and though a date has not been declared for the release of the digital Yuan, its launch is arguably closer than ever.

Digital Rubble Prototype to be Introduced in Early 2022

In line with the development of its Central Bank Digital Currency (CBDC), dubbed the Digital Rubble, the Central Bank of Russia is set to launch a prototype platform for the new form of money in early 2022.

According to a report from Reuters, citing the Central Bank Governor Elvira Nabiullina, the prototype platform will be succeeded by a pilot test. The apex bank will make a final decision on whether to launch the Digital Ruble or not.

Russia has had its eyes on the emerging CBDC trend since at least the fourth quarter of 2022. With the latest advances from the country, the State Duma is also set to formulate new laws that will bolster the ultimate emergence of the Digital Ruble. As reported earlier by the local news channel, Izvestia, the head of the State Duma Committee on the Financial Market, Anatoly Aksakov, affirmed that the legal framework governing the CBDC will be worked on the proposed trial is implemented next year.

According to extant monetary provisions, as many as eight Federal laws and five codes ranging from the Civil Code, Tax Code, Budgetary Code, Criminal Code, and Administrative Code will have to be revised in order to accommodate the administrations of the Digital Ruble. Per the report, the legal framework that will emanate from the lawmakers will address many key aspects, including the Central Bank’s powers to issue and circulate the Digital Ruble.

Preparations have been underway for a potential Digital Ruble pilot test with as many as 5 Russian banks ready to join the test per an earlier report by Blockchain.News. Many experts believe the race to float a CBDC is crucial to tag along with the ongoing monetary revolution is heating up, and the Central Bank of Russia is duly tagging along.

Despite Threats of Ban, Russians Transact Over $5B in Crypto Annually: BOR

The bearish stance of the Bank of Russia has not in any way deterred its citizens from transacting with digital currencies.

A new review on financial stability published by the Russian apex bank on Thursday showcases that the crypto savvy population in the country has transacted more than 350 billion rubles, or $5 billion, according to data from major banks operating in the nation.

In the report, the Bank of Russia pointed out that the country ranked second as the region with the most visits to Binance, the world’s largest digital currency exchange by trading volume. According to data from SimilarWeb, Turkey ranks top on the list, with the top 5 spots being filled by Brazil, Argentina, and the Philippines.

The participation of Russians in the activities in the digital currency ecosystem is robust, reflected by the central bank highlighting the country’s third-ranking in terms of Bitcoin mining’s national hashrates, citing data from the Cambridge Bitcoin Electricity Consumption Index as of August 2021. The bank is still not at ease with the growing adoption of Bitcoin and cryptocurrencies in the country due to their perceived risks to the financial ecosystem and the environment alike.

“The relationship between digital currencies and the financial sector remains limited at the moment. However, the rapid growth and the widespread adoption of digital currencies would pose higher risks both globally and for the Russian financial market,” the bank said.

From key data from popular data aggregation platforms, countries like China and Nigeria with a very harsh stance against digital currency usage are often amongst those with high transaction volumes. While the Nigerian Central Bank, for instance, has proscribed all crypto-related transactions involving national banks, the country has maintained its stance as a hub for P2P transactions in Africa.

The all-encompassing ban of the Chinese government on Bitcoin has also not tamed the interest of the citizens on offshoots of crypto, including Non-Fungible Tokens (NFTs).

Bank of Russia Commences Digital Ruble Trials

The Bank of Russia (BoR) has announced the commencement of its Digital Ruble trials, making the most ambitious push for a functional Central Bank Digital Currency (CBDC) for the country.

As announced by the bank, the trials became necessary following the creation of a prototype of the digital ruble platform was completed in December 2021.

Following this completion, the Bank of Russia received volunteers from 12 banks to be a part of the trial exercises for the CBDC. Of these 12, three connected their system with the Digital Ruble platform, and two successfully changed non-fiat ruble into digital ruble and transferred this same funds to other people. All of them successfully opened a wallet that supported the CBDC.

“The digital ruble platform is a new opportunity for citizens, businesses, and the state. We plan that for citizens, transfers in digital rubles will be free and available in any region of the country, and for businesses, this will reduce costs and create opportunities for the development of innovative products and services. The state will also receive a new tool for targeted payments and administration of budget payments,” said Olga Skorobogatova, First Deputy Chairman of the Bank of Russia.”

In addition, Olga confirmed that the BOR “will test various scenarios and refine the digital ruble platform this year. In the next stages of platform development, we also plan to provide seamless interaction with digital platforms and digital ecosystems.”

The Digital Ruble trial comes following the highly controversial plans by the apex bank to ban Bitcoin and all related Proof-of-Work (PoW) mining activities. The approach to prohibit the premier digital currency takes close precedence to associated actions by the People’s Bank of China (PBoC), which recently debuted its e-CNY CBDC at the ongoing Beijing Olympics games.

With more stages outlined for the Digital Ruble, the chances are that the BoR will introduce some sort of regulation to tame BTC for the Digital Ruble to have less competition when it finally sees the light of day.

Binance Joins Association of Russian Banks, Strengthening Strategic Relations

Binance cryptocurrency exchange has joined the Association of Russian Banks (ARB), which arguably bolsters its relationship with top financial institutions in the country.

As reported by a local media outlet, Prime, the onboarding of the trading platform into the banking organization was accompanied by establishing a new department within the body.

The department is called the Expert Center for Digital Financial Assets and Digital Currencies. Per the report, it will be led by Olga Goncharova, the Binance Exchange’s Russia and CIS head. As a frontline expert in the digital currency ecosystem, Binance, through the expert Center, will supply members of the association with technical insights related to digital currencies.

As detailed in the report, the new “Expert Center” will help compile “professional opinions on the circulation of digital financial assets and digital currencies” and provide members “with expert and analytical materials” on the topic of crypto, as well as providing “international experience.”

The role of Binance is assuming is pivotal in the overall emancipation of digital currencies in Russia as the ARB is a body that consists of about 290 banks. Despite the country’s largest banking organizations such as Gazprombank, Sberbank, and six others are not being enlisted as members based on a recent fallout, the organization still has a prominent presence in determining the direction of financial policies in the country.

The Russian government has been analyzing its potential moves related to its engagement with Bitcoin and other digital currencies lately. While the Bank of Russia has proposed a ban option, the move has been heavily criticized by some of the country’s local leaders, including Telegram founder and Chief Executive Officer Pavel Durov and Leonid Volkov, the Chief of Staff to the Russian opposition leader, Alexei Navalny.

The Bank has now resorted to banning Bitcoin mining, a move that it hopes will generally limit the circulation of the digital currency in the country. The ascension of Binance to the ARB may change the narrative even in ways that cannot be deciphered at this time.

Russia's Central Bank Plans to Launch its CBDC-Digital Ruble across all Banks in 2024

The Bank of Russia launched a digital ruble experiment in 2022 to explore business models and innovative use cases for central bank digital currencies (CBDCs).

The Central Bank of Russia emphasized that the pilot project aims to better understand the regulatory, legal, and technical aspects of CBDCs, and plans to launch an official digital ruble within a few years.

Russia’s central bank’s latest monetary policy said the country plans to connect the digital ruble platform to all banks and credit institutions by 2024.

In March 2024, a new round of elections will be held on whether the current Russian President Vladimir Putin will be re-elected. By then, the digital ruble is expected to have completed customer-to-customer transaction trials and customer-to-business and business-to-customer settlements.

To facilitate the rollout of the digital ruble, the Bank of Russia will also conduct a beta test of the digital ruble-based smart contract with a limited number of participants in 2023.

At the same time, it is expected that in 2025, the offline mode of the digital ruble will be completed.

The Central Bank of Russia stated:

“The phased process of introducing the digital ruble will provide market participants with the opportunity to adapt to new conditions.”

The Bank of Russia noted that the Russian economy is increasingly digitized, thus requiring an advanced payment system based on a government-backed digital currency.

Gazprombank suggests banks be given more time to adjust to digital

Gazprombank, which is an unit of the main Russian government-owned gas business, Gazprom, has openly recommended that banks be given extra time before the implementation of the digital currency. Because of international financial restrictions and rising geopolitical tensions, progress on the country’s central bank digital currency (CBDC) initiative has picked up speed.

As was reported by local media on February 7th, Gazprombank, one of the 15 banks participating in the CBDC pilot, issued a public statement with a recommendation to proceed with caution regarding the interests of traditional banks. The statement read, “It is imperative that banks take measures to mitigate potential losses.” As a result, it is of the utmost importance to be aware of the possible dangers that are connected with the transition to a digital ruble and to approach its implementation with extreme care, giving the monetary system the time to readjust.

Nevertheless, the statement acknowledges that the CBDC will contribute to more openness across the whole of the Russian economic and financial system.

The Russian division of McKinsey calculated that conventional banks might potentially suffer losses of around $3.5 billion (250 billion rubles) in the first five years as a result of the adoption of CBDC. During the same time period, the consulting company predicted that the stores would make an annual profit of $1.1 billion.

The planning stages of a CBDC were initiated in Russia around the year 2020. The completion of the transition to the digital rouble, which is presently undergoing testing for settlement with the banks, is anticipated for this year. The most recent update to the Bank of Russia’s monetary policy indicates that the regulatory body would start the process of connecting all banks and credit institutions to the digital rouble network in the year 2024.

Additionally, the Central Bank of Russia has initiated the process of creating a cross-border settlement system that will make use of a CBDC. When Russia began a full-scale invasion of Ukraine at the end of February 2022, the nation was already facing rising financial and economic sanctions as a result of the intensification of the conflict between Russia and Ukraine.

Bank of Russia to Debut Digital Ruble in April 2023

The first consumer pilot for the nation’s central bank digital currency (CBDC) will be rolled out by the Bank of Russia on April 1, 2023, as part of preparations for this day.

According to the first deputy governor Olga Skorobogatova, the Russian Central Bank is getting ready to launch the first real-world digital ruble transactions very soon. These transactions will include 13 local banks and many retailers.

According to a report by the regional news agency TASS, the official said that the future CBDC pilot would include genuine activities and real consumers in Russia, but that it will be restricted to a set amount of transactions and clients.

At the Ural Forum on Cybersecurity in Finance, Skorobogatova said that “We expect to begin the digital ruble project on April 1 with transactions including individual transfers as well as payments in trade and service organizations.” She went on to say that the financial institutions who were taking part in the pilot program had technically shown that they were prepared to begin testing the digital ruble.

The deputy governor provided clarification that regular consumers would not be allowed to participate in the pilot in the first stage, since banks would begin the pilot with clients who have been picked in advance. According to what Skorobogatova said, when the first stage of the pilot program is completed, the Bank of Russia intends to evaluate how to further grow the digital ruble.

The most recent declaration made by Skorobogatova is in line with the implementation strategy for the digital ruble that was publicly presented by the central bank in June of 2022. Because of Western economic sanctions against Russia, the consumer CBDC pilot was pushed up to a date that was originally planned for 2024 but was brought up to a date that was earlier because the Russian central bank was seeking for an alternative to the SWIFT payments system.

This information comes at a time when some Russian authorities are stating that the Bank of Russia is examining the possibility of a gold-backed coin that would target international commerce. Vladimir Chistyukhin, the first deputy governor of the Bank of Russia, is of the opinion that the creation of a “golden token” would assist Russia in the development of a new investment product that is appealing to investors and a payment mechanism that is required for international settlement.