The Russian government believes that bitcoin currency and other virtual currencies are no longer a threat to the country’s financial system. This was the announcement by Deputy Chair Olga Skorobogatov of the Bank of Russia (Central Bank) and the country’s Federal Surveillance Service.
According to a report by the TASS news agency, Deputy Minister Alexei Moiseev has decided to play the waiting game in relation to Bitcoin. It was Mr. Moiseev who relentlessly banned cryptocurrency in 2014. A bill banning bitcoin was even approved in the Russian parliament, while government agencies were asked to comment on the matter. At the same time, experts on Bitcoin were consulted while other bureaucrats rejected the Treasury’s recommendation. On the other hand, Alexander Bastrykin (chairman of the committee of inquiry) said that Bitcoin threatened the financial stability of their country.
Careful monitoring
The government has taken a different approach. Both the Bank of Russia and the federal financial surveillance service have been tasked with closely monitoring the digital currency for reasons of economic security. These agencies stated that there was no danger, although risks may arise in the future. The draft injunction initially provided for a seven-year prison sentence for anyone who used Bitcoin in Russia less than a year ago. The central bank will not take any precautionary measures against Bitcoin either.
Meanwhile, regulators and bureaucracy officials said they wanted to understand Bitcoin well and develop a framework for regulation based on that knowledge. The use and mining of the digital currency will not be considered a criminal offense if the regulations for Bitcoin are implemented. The Bank of Russia continues to create a path after creating a financial technology association to focus on evaluating this platform.
Financial Technology Association
The FinTech group was organized on December 28, 2016. It consists of representatives from primary banks in Russia such as Alfa Bank, the state-run SberBank of Russia and VTB Universal Bank. Also included are the Qiwi payment service provider and the National System of Payment Cards (NSPK). The latter operates the MIR debit card in Russia. Qiwi’s Chief Executive Officer (Sergey Solonin) has been appointed head of the association. Qiwi is the main representative of the technology among all financial companies in the country. In addition to blockchain, the Russian central bank will also examine identification platforms and new payment systems.
Russia built this prototype MIR card for the new internal payment system. Mass production of this card began in 2016. Developers of this card consider the payment systems of BRICS (Emerging Economies) to be future partners. These countries are Brazil, Russia, India and China.
Deputy Chairwoman Olga Skorobogatov stated that the main goals of the FinTech Association are to develop and present new technological solutions to promote the growth of the Russian financial sector and promote the digitization of the national economy. This disclosure is the latest indication that the central bank will play an important and visible role in testing and deploying blockchain in the financial industry.
The Bank of Russia does not hide its interest in this technology. Last year, Skorobogatov stated that Russian financial firms will need to prepare for wider use of blockchain in the near future. It is also making practical changes to this technology and introduced a financial messaging system in October. This is known as the “master chain”. The government is reviewing blockchain concepts separately, while the National Securities Depository, along with other institutions, has made similar efforts.
Regulation for Bitcoin
A local media broadcast revealed that Deputy Minister Moiseev announced at an event in London that the bill may be introduced sometime next fall but may still be delayed. Attempts to pass laws related to Bitcoin have been sporadic since 2015. They were even at a loss after government officials argued over the final scope. The measure focuses on the creation of “money surrogates (alternatives)” covering both Bitcoin and other virtual currencies.
Bank of Russia continues to work with local financial organizations to conduct research into potential blockchain applications. In the meantime, private companies are analyzing the technology for their own purposes. The Federal Anti-Monopoly Service worked with Sberbank on a document retention project. Concerns about the use of Bitcoin and other virtual currencies were allayed after the Federal Tax Service of the Russian Federation took a position on the legitimacy of the currency and its use, as well as all relevant transactions.
Time of indecision
For years, the Russian government experienced so-called uncertainty as to whether to ban or accept the new currency. There have even been attempts to introduce penalties such as imprisonment for the mere use of Bitcoin. Even bank employees who did business with Bitcoin should be detained and prevented from holding certain positions in a financial institution. However, the authorities overturned their decision. Instead, it issued a new guideline to the Treasury Department to work out a new version of this bitcoin legislation.
Even then, the authorities have the prerogative to investigate any person or company that is using the currency for possible terrorist and money laundering activities. This can lead to knowing your Client (KYC) and Anti Money Laundering (AML) from exchanges even though the government has not provided any clarifications or interpretations. The guidelines are vague so far.
As a foreign currency, trading (buying and selling) Bitcoin and other cryptocurrencies is viewed as a money transaction. A Federal Tax Service document gives Bitcoin legality. All trading functions relevant to Bitcoin are considered foreign or external securities.
Conclusion
All of these recent developments indicate that there is a good chance that Bitcoin will soon be legalized in the Russian Federation.
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