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DFA Bill Passed, But Central Bank of Russia Still Thinks Cryptos Are Criminal

Despite the Digital Financial Assets bill being passed by the State Duma, Russia’s Central Bank has nevertheless argued that crypto transactions are not deemed as legitimate investments.

Russia passed its first major legislation regarding cryptocurrencies last week. However, the country’s Central Bank still continues to treat the crypto industry as a criminal field and thinks it facilitates illegal dark transactions.

First deputy governor of the bank of Russia, Sergei Shvetsov, has come forward to comment on the bank’s negative stance regarding crypto investments. He compared Bitcoins and altcoins to financial pyramid schemes and Russian roulette games. During a live YouTube stream where Russia’s new Digital Financial Assets (DFA) bill and its position among retail investors were discussed, Shvetsov said:

“The Bank of Russia, as a regulator, adheres to the position that crypto purchases are not an investment. It is more like a financial pyramid or roulette games and does not apply to the financial market. Either government or financial intermediaries should not encourage citizens to acquire cryptocurrencies.”

The deputy governor of Russia’s Central Bank thinks that cryptocurrency use is subject to criminal liability, backing his point by mentioning Bitcoins. The official justified his stance by stating that Bitcoins are often used in illicit activities, such as money laundering, and is therefore the reason why the Bank of Russia will not support these cryptocurrencies.

The Bank of Russia’s public declaration of their views regarding crypto comes shortly after the Russian Parliament passed a major bill on cryptocurrencies on July 22. The DFA bill is dubbed “On Digital Assets.” Though the financial law outlines that transactions with cryptocurrencies will be legalized and in effect on January 1, 2021, it does not discuss the actual regulation revolving around cryptocurrencies.

Regulation is to be discussed in the autumn session, where the final law will be drafted up.

In the meantime, the Bank of Russia is designated by the DFA bill as a key regulator, which means that the Central Bank will be the one responsible of determining which type of investors should be considered eligible for investing in crypto products.

Cuba's Central Bank Moves to Legalize Use of Cryptocurrencies

Cuba has announced that it will recognize and regulate cryptocurrencies for payments, saying that socioeconomic interest has spurred its decision.

Cuba’s Central Bank recently published a resolution in the state-run official Gazette, stating that it will set new regulations for dealing with cryptocurrencies. The central bank said that business providers of related services would need a license from the regulator to continue operations within the communist state.

The announcement by the Central Bank of Cuba comes as the cryptocurrency popularity has increased in the country among some technologically savvy groups. Crypto interest in Cuba has increased due to the increasing difficulty of sending and using US dollars on the island, partly because of a toughened American embargo on Cuba, which has turned the communist state into an outcast in the global economy.

Former US President Donald Trump’s administration implemented tough embargo rules that have made life difficult in Cuba.

Dr. Mrinalini Tankha, a professor of anthropology at Portland State University, who has been researching Cuba for 10 years, disclosed that sending and receiving money between Cuba and the US became extremely difficult under Trump’s administration.

Western Union was a major channel for remittances operating its services in Cuba for over 20 years. In 2020, the American multinational financial services company shut down almost all of its 400 locations in Cuba amid increasingly aggressive Trump-era sanctions.

Although some people expected US president Joe Biden to normalize bilateral relations, he has instead adopted a harder line, imposing further sanctions against Cuba officials.

The desperate need for cash in Cuba has been triggered by blocked access to the global economy and further worsened by the Covid-19 pandemic. Such phenomena have led to the rise of cryptocurrency adoption in the nation.

The rise of the internet in Cuba has contributed to the growing cryptocurrency community. So many people in the country have 3G connectivity and smartphones. A weak currency is another factor that contributes to the appeal of Bitcoin.

Since cryptocurrencies can be used for anonymous transactions, they are often a popular way for people to evade government regulations, including circumventing US restrictions on sending money to Cuba.

Cuba’s central bank stated on the resolution that it plans to authorize the use of crypto assets “for reasons of socioeconomic interest” and the government assuring that such operations would be controlled. The central bank explicitly stated that the operations could not involve illegal activities.

Crypto as A Medium of Exchange

The resolution published by Cuba’s central bank is a promising sign for local citizens showing interest in participating in the global economy through Bitcoin and welcomes the use of other cryptocurrencies.

Cuba’s decision to embrace decentralized digital currency could help the nation to circumvent the US sanctions regime. The move made by the country comes after El Salvador recently announced that it would recognize the use of Bitcoin as a way to encourage remittances from its Salvadorans living abroad.

In June, El Salvador passed a law that gave Bitcoin an official currency alongside the US dollar. El Salvador president Nayib Bukele stated that citizens living abroad, mainly the US, would use Bitcoin to instantly transfer money to family members and loved ones living in the nation. The president said that the adoption of Bitcoin would save local citizens around $400 million per year in fees for receiving remittances from abroad.

Many people across the world have become attracted to the use case of Bitcoin as a medium for sending and receiving money overseas. Users take advantage of cryptocurrency to avoid the high costs of money transfer services and traditional banks.

South Korea’s Crypto Market Gears up to Legitimacy, With Banks Eyeing a Share of the Cake

With the incoming South Korean President, Yoon Suk-yeol, pledging the easing of crypto regulations, the market is on a solid path to being significantly legitimized, according to local media outlet The Korea Herald.

Local banks in the nation intend to ride the wave because they are seeking authorization to enter the crypto space. Per the report:

“Local banks are currently preparing to submit a request with incoming President Yoon Suk-yeol’s presidential transition committee to allow them to enter the crypto business.”

Through the Korea Federation of Banks, a representative body of commercial banks, the financial institutions asked domestic lenders to evaluate their draft of dealing with crypto. The banks raised concerns that the crypto market in the country could be monopolized because a “certain local crypto exchange” accounted for 90% of the market share.

As the fourth-largest economy in Asia, South Korea has experienced a notable crypto adoption rate.

For instance, Koreans invested 52.8 trillion won, approximately $43.6 billion, in cryptocurrencies last year, according to data by the Financial Supervisory Service. This information was obtained from the five major crypto exchanges in the nation, namely, Bithumb, Gopax, Korbit, Coinone, and Upbit.

Crypto investors in their 20s and 30s accounted for 36% of the share at 19.4 trillion won.

Crypto exchanges in South Korea have been experiencing exponential growth as retail investors continue joining the digital asset market bandwagon. Therefore, commercial banks in the nation seek a share of this cake.

Kim Kap-lae, a research fellow at the Korea Capital Market Institute, believes the incoming administration should revamp the regulatory system by looking at the characteristics of cryptocurrencies.

He added:

“The lack of an information disclosure system has been preventing crypto investors from receiving necessary information.”

Upon taking office in May, South Korean President-elect Yoon Suk-yeol vowed to zero-tax crypto trading gains not exceeding 50 million won, approximately $40,000, similar to stock gains.