Russia Finance Ministry Advances Crypto Regulation Plans

Russia’s finance ministry said on Monday it would take proposals from the country’s central bank into account as long as they do not contradict its own approach, as Russia moves toward regulation governing digital assets.

The finance ministry on Friday had submitted legislative proposals to the government that seek to allow the use of cryptocurrencies under some conditions, while the central bank wants an overall ban.

Earlier this year President Vladimir Putin called for the two bodies to find common ground.

The Bank of Russia didn’t immediately respond to a request for comment.

Digital ruble

Last week the central bank said it had launched a pilot of the digital ruble, the planned central bank digital currency that it sees as the alternative to cryptocurrencies for Russians.

Three banks are already suporting pilot transactions for their clients using existing mobile banking apps, as well as transactions exchanging rubles from their accounts for the digital version, the bank said. Nine more are planning to join the pilot soon, it said.

The Bank of Russia wants the use of cryptocurrency entirely banned in the country over the risks digital assets pose to financial stability.

The bank said in a letter to the finance ministry last week that allowing investors to trade crypto through banks would create an “illusion of government protection” while encouraging people to participate in a “de-facto Ponzi scheme” and providing no real benefit to the Russian economy.

The finance ministry, meanwhile, favours a regulatory approach that allows crypto as an investment tool but not as a means of payment.

Controls

The draft legislation aims to create a legal market for digital currencies, the ministry said in Monday.

One proposal could see the purchase or sale of crypto requiring customer identification, while another would require crypto exchanges to obtain a licence in Russia while introducing financial literacy tests that would determine how much individuals are allowed to invest in crypto annually.

The Bank of Russia opposes cryptocurrency mining in the country, while the ministry wants to permit it under a taxation basis.

Russia is one of many countries attempting to create regulations for the cryptocurrency sector, which remains largely unsupervised.

Cryptocurrencies, which are notoriously volatile, saw their value plunge last week amidst the threat of an outbreak of hostilities in the Ukraine.

The most recent dip followed a modest recovery after a steep fall in the value of digital assets such as Bitcoin in January.