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To Criminalize or Not to Criminalize Bitcoin and Crypto? Moscow Reconsiders

The State Duma is discussing its legislative plans regarding Bitcoin (BTC) and cryptocurrency usage and has been reported to seemingly have a change of heart regarding digital assets adoption in Russia.

Russia Wants to Ban BTC and Crypto

Previously, the Russian parliament was planning on banning all forms of cryptocurrencies once and for all. This implication would have brought severe repercussions for the Russian crypto community, as it would have meant that Bitcoin and altcoin owners would face serious jail time or be slapped with a huge fine if they did not comply with regulations. The rumors around the legislation has caused quite a ripple, as Russian officials have been arguing about crypto regulation since January 2018.

Russian Parliament Revises DFA Bill

However, recent reports indicated that the Russian parliament is discussing the amendment of their legislation regarding cryptocurrencies. Rather than putting Bitcoin and crypto investors behind bars for their involvement with crypto assets, they are thinking of a less punitive law to regulate cryptocurrency use in Russia.

Legislative readings on the Digital Financial Assets (DFA) bill in Russia are scheduled in different sessions, and the State Duma has been thinking of passing their proposal for digital financial assets (DFA) in the autumn one. Russian financial regulators have in fact been hard at work reviewing a newly revised version of the DFA bill, that would not criminalize Bitcoin. However, it is safe to say that there will be imposed regulations regarding cryptocurrencies. During the preparation of the DFA bill for the second reading, industry concepts such as “mining” and tokens” were removed. All that was left was a link indicating that the regulation of crypto assets would be determined in another law; this would be “adopted in the autumn session,” Askakov confirmed.

One thing is for certain: there will be “no responsibility in this bill” and criminal liability for digital currency use may be waived. As for smart contracts, ICOs and mining in Russia, legislation has not yet been determined.

State Duma – Not a Crypto Fan

Though many may view this as an improvement from straight up jailing crypto investors, Russia’s State Duma has been firm in the past regarding its stance regarding Bitcoins and altcoins- it simply does not like it. Chairman of the Duma committee Anatoly Askakov spoke up regarding crypto and expressed his views. He is one of the officials overlooking Russian financial market regulations:

“On the one hand, this is a means of payment in the form of an electronic digital code, but at the same time it is neither an international monetary unit, nor a monetary unit of a foreign state or the Russian Federation.”

Will Crypto Assets Have a Future in Russia After All? State Duma Passes DFA Bill

The State Duma of Russia passed a law regarding digital financial assets (DFA) in the financial bill’s third reading, which determined the fate of Bitcoin and other cryptocurrencies.

Russian Parliament: How It Works

Russian legislative system is separated in different readings for different bills, to determine the criteria for law adoption of each proposed regulatory rule. Each bill undergoes three readings as it transitions from a draft to adoption phase. The third reading, which is the final one, therefore is associated with final adoption.

DFA Bill Finally Goes Through

The DFA bill, named “On Digital Financial Assets,” decrees that on January 1, 2021, transactions with cryptocurrencies involved will be legalized. However, the catch is that crypto enthusiasts will not be able to use Bitcoins (BTC) and altcoins as a form of payment, but rather, they would have to conduct business payments with fiat money.

“On Digital Financial Assets” bill also has no concept of “token” or “mining” in it, as the Russian parliament has rectified the bill during the second reading and removed these notions from the draft.

Though crypto-relevant transactions will be legalized, Russia is currently still waiting for the autumn session in order to draft up a final law, that will determine the specifics on the actual regulation of cryptocurrency.

Bill Dictates What “Digital Currency” Is

Under the DFA bill, an investor can therefore hold BTC funds. However, the crypto asset is not recognized as an international monetary unit of Russia or a foreign state. The DFA official document also defines what Russia considers as “digital currency” from a legal viewpoint. Crypto assets can be used as a store of value; however, Bitcoins and other cryptocurrencies are neither an international currency, nor a currency of a foreign state or Russia.

Therefore, according to the State Duma overlooking the Financial Market sector, crypto assets, such as Bitcoins, cannot be used to pay for goods and services.

BTC is Out, But Stablecoins Are In

Though Bitcoins and altcoins will not be allowed to replace fiat payments, the newly adopted “On Digital Financial Assets” bill will allow local businesses to issue stablecoins, which is self-explanatory in that it is a “stable” token that is usually set to fiat currencies, such as USD. Head of the State Duma’s Financial Market Committee Anatoly Aksakov confirmed that Russia will be able to use stablecoin tokens and also exchange them for other assets, which include but are not restricted to digital assets that were issued abroad.

Head of State Duma Despises Crypto

Though this may be considered as huge improvement from criminalizing cryptocurrencies– a move that Russia was planning to implement – Chairman of the State Duma committee Anatoly Askakov has made his stance on cryptocurrencies very clear in the past, making it known that he disliked cryptocurrencies of any sort. He stated emphatically that if it was not for Russia’s official currency, Ruble, Russian government would not adopt it.

DFA Bill Sets The Mood For Autumn Bill

At this very moment, while the DFA bill provides the basis of Russia’s crypto legislation and is set to be adopted by January 2, 2021, the global crypto community is still awaiting legal action regarding the regulation of the cryptocurrency industry in Russia as a whole. That will be dictated by another bill, set to be introduced in the autumn session.

Russia's Sber to Complete Digital Assets Issuance by July

One of Russia’s largest financial institutions, Sber, is well on track to begin trading Digital Financial Assets (DFA) on its newly developed trading platform.

As reported by the TASS state-sponsored news agency, which interviewed Anatoly Popov, Deputy Chairman of the Board of Sberbank, the trading activities are billed to commence within the next month.

Sberbank as it was previously known had been building its DFA trading platform for quite some time, but securing a license from the Central Bank of Russia (CBR) had been much of a hassle. With the license now secured, the bank is committed to considering all forms of digital assets and technologies, with blockchain technology inclusive.

“We are watching the development of new technologies, including in the field of distributed registries, we are studying how blockchain technologies are developing. Currently, many projects are using them, and in Sber, of course. In the spring, we were included in the register of information system operators in which digital financial assets are issued. Our platform has already passed acceptance tests, and the first transaction will take place within a month,”

Anatoly said.

Besides Sber, VTB, Russia’s second-largest banking firm is also reportedly coordinating efforts to launch the trading of its own DFA around September this year. This growing embrace of DFAs aligns with the subtle clamour for the CBR to permit digital currencies to thrive in Russia.

With the ongoing war with Ukraine and the growing list of sanctions on the Russian economy and financial sector, even government officials have advocated for DFAs to be regulated in Russia. Doing so may create a new channel that can help power global trade and other financial transactions in areas where Russians might currently be restricted.

Sber is channelling positive momentum in its DFA pursuit as it previously launched the Sberbank stablecoin.

Duma Approves Bill Placing a Ban on the Use of Digital Assets in Russia

Russian President Vladimir Putin has signed a bill addressing the ban on the use of digital financial assets (DFA) for payments.

The bill which was passed to the Russian Assembly also known as the State Duma was approved on July 8. It is also an amendment to the previous bill passed in 2020 which banned cryptocurrencies from being used in payments.

The new bill had already been considered by the Federation Council and the Upper Chamber of Parliament. Both chambers are meant to approve any bill before it can finally be signed by the President of Russia.

Two years ago, a digital assets law was drafted to ban the use of cryptocurrency for payment in Russia. The bill regards any form of digital asset payment as illegal and punishable.

The authorities were also mindful of the financial instability that the use of crypto would cause. Meanwhile, in February 2022, the Russian government announced its schemes to regularize cryptocurrency in the country. The scheme was to put strict rules to safeguard investors against the risk of crypto investments.

The Ministry of Finance, Rosfinmonitoring, the Bank of Russia, the Ministry of Internal Affairs, the Federal Security Service, the Federal Tax Service, the Ministry of Economic Development, and the Prosecutor General’s Office all partook in the debate that birthed the plans to regulate digital assets trade. Although the Central Bank of Russia (CBR) was still pushing for the government to ban the digital asset.

Russia is Now Under Global Scrutiny

For a while, the country has been under the eyes of authorities due to certain crypto crimes connected to Russia.

International organizations including the European Union issued a ban on Russia and this caused many others to stay away from the estranged country. Binance, the world’s largest cryptocurrency exchange pulled most of its services from Russians. Mastercard, a leading financial service provider disconnected its payment system from Russia as a penalty for remaining resolute in its invasion of Ukraine.

Even though Russia seems not open-handed about crypto as the signed bill connotes, it is suspected that the country is making use of crypto to evade sanctions.