Experts: Russia’s new crypto regulation proposals are a ‘circus,’ still ‘essentially a total ban’

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Symbiosis

It looks like no mat­ter how hard they try, Russ­ian leg­is­la­tors are unable to tack­le the top­ic of cryp­tocur­ren­cy reg­u­la­tion with­out near-ban­ning dig­i­tal assets. Fur­ther, some recent devel­op­ments have shown that reg­u­la­tors’ right hand appar­ent­ly doesn’t always know what the left is doing at best—or tries to under­mine it at worst.

Case in point, both the Russ­ian Min­istry of Finance (Min­fin) and the cen­tral bank divulged their own ver­sions of new cryp­to-relat­ed pro­pos­als last Fri­day. And while Minfin’s bill sug­gests giv­ing cryp­to investors at least some lenien­cy (although not much), the cen­tral bank simul­ta­ne­ous­ly proposed—yet again—to make cryp­tocur­ren­cies out­right ille­gal in any shape or form and to impose mas­sive fines for deal­ing with them.

“Recent­ly, the sit­u­a­tion around [cryp­to] reg­u­la­tion in Rus­sia has been rem­i­nis­cent of a cir­cus. First, the cen­tral bank wants to ban every­thing, then-Pres­i­dent Vladimir Putin says his weighty word and a good bill pre­pared by the Min­istry of Finance comes out,” Maria Stanke­vich, devel­op­ment direc­tor at cryp­to exchange EXMO, told RBC.

Difference of opinion

Stanke­vich fur­ther explained that local cryp­to exchanges have been active­ly dis­cussing the pos­si­bil­i­ties and pro­ce­dures adopt­ed in oth­er coun­tries with the State Duma and oth­er author­i­ties in order to improve the exist­ing draft law. “And then the cen­tral bank pub­lish­es anoth­er doc­u­ment where it pro­pos­es to ban every­thing and impose huge fines,” she continued.

“I sin­cere­ly believe (after watch­ing the con­fer­ence and read­ing the bill) that there are no peo­ple in the cen­tral bank today who under­stand at least some­thing about cryp­tocur­ren­cies,” Stanke­vich not­ed. “I think that, as always, Vladimir Putin will have the final say. But since we have already heard his point of view, I think the Min­istry of Finance will win.”

Is Minfin’s proposal really better?

On paper, Minfin’s draft bill is a bit more lib­er­at­ing for cryp­to enthu­si­asts. Accord­ing to it, cryp­tocur­ren­cies will at least be viable as invest­ment instru­ments, although pay­ments with dig­i­tal assets would still remain ille­gal. How­ev­er, there’s a catch.

Even for invest­ment pur­pos­es, Minfin’s bill impos­es dra­con­ian lim­i­ta­tions. For starters, even those retail users who suc­cess­ful­ly pass some spe­cial “test” to demon­strate their knowl­edge of cryp­to won’t be able to invest more than 600,000 rubles (rough­ly $7,600 at press time) a year in dig­i­tal assets. Mean­while, peo­ple who can’t (or won’t) pass this test will be able to invest only up to 50,000 rubles ($630) in cryp­tocur­ren­cies per year.

Niki­ta Sosh­nikov, direc­tor of cryp­to exchange Alfa­cash, told Cryp­toSlate:

“On one hand, this require­ment is under­stand­able. Finan­cial author­i­ties are there­by try­ing to pro­tect Rus­sians from rash invest­ments in cryp­tocur­ren­cies and poten­tial risks asso­ci­at­ed with such invest­ments. But on the oth­er hand, the restric­tion of 50,000 rubles looks over­ly strict,”  

Push toward institutions

Sosh­nikov added that it is indeed not clear why retail investors who pass the test shouldn’t be able to invest more than $7,600 in cryp­to annu­al­ly. Espe­cial­ly since invest­ments in stocks issued by Russ­ian com­pa­nies, for exam­ple, are not sub­ject to such strict rules.

“As recent days have shown us, they also demon­strate strong volatil­i­ty since they are high­ly exposed to geopo­lit­i­cal risks,” Sosh­nikov con­tin­ued. “It is also curi­ous that such lim­its are not imposed on qual­i­fied investors and legal enti­ties, that is, the tilt towards insti­tu­tion­al pres­ence in cryp­tocur­ren­cies is obvious.”

Nat­u­ral­ly, Minfin’s pro­posed restric­tions don’t end there. Apart from rig­or­ous know-your-cus­tomer require­ments, all cryp­to exchanges will have to be added to a spe­cial reg­istry and obtain a cor­re­spond­ing license from an autho­rized body.

“Essentially a total ban”

Sergey Mendeleev, CEO of finan­cial ser­vices provider InDe­Fi Smart­bank, was a lot less cour­te­ous. Speak­ing to Cryp­toSlate, he opined that in its cur­rent form, Minfin’s pro­pos­al is hard­ly any dif­fer­ent from a blan­ket ban on crypto.

“Any per­son under­stands that we are essen­tial­ly talk­ing about a total ban. I don’t see any dif­fer­ence between the pro­pos­als draft­ed by the cen­tral bank and the Min­istry of Finance. Both effec­tive­ly make cryp­to-relat­ed oper­a­tions impos­si­ble in the Russ­ian Fed­er­a­tion,” Mendeleev told Cryp­toSlate.

But at least some­thing good can come out of those new bills, he added iron­i­cal­ly, and that’s the knowl­edge about how to bypass them.

“But in gen­er­al, thank God. As at one time, idi­ot­ic bans enact­ed by Roskom­nad­zor led to the fact that any­one now knows how to use VPN and TOR,” he inferred. “So such mea­sures in rela­tion to cryp­tocur­ren­cies will only con­tribute to the for­ma­tion of a tru­ly decen­tral­ized mar­ket and obso­lete­ness of fiat banks that are liv­ing out their last decade.”

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