On Thursday, January 20, 2022, the Central Bank of Russia proposed a ban on cryptocurrencies as well as crypto mining. The proposed ban was meant to prevent financial institutions from carrying out any operations with cryptocurrencies. This would have led to blocking transactions aimed at buying or selling cryptocurrencies for fiat currencies.
Since China’s May 2021 ban on bitcoin mining, Russia has come in fast with 11% of the network’s hashing, up from 7%, almost bypassing Kazakhstan, which is in second place with 18% of the network’s mining.
Image source: Economist
Despite the proposed ban announced by the Central Bank of Russia, the Russian government then shared a road map on January 28, 2022, with a plan to tax and regulate cryptocurrencies, as reported by Russian news agency RBC.
Then, on February 8, 2022, the Russian government and the Central Bank of Russia reached an agreement on regulating cryptocurrencies. Based on the prepared draft cryptocurrency providers and exchange platforms are required to have adequate capital and liquidity, obtain approval and a license to operate in Russia, apply a full client identification (KYC), and adhere to anti-money laundering (AML) laws.
Cryptocurrencies will be treated as foreign currencies based on the proposed draft. Once the legislative draft becomes fully enforced by the law, only authorized and licensed local crypto providers will be able to accept crypto transactions.
It was highlighted by Alexei Moiseev, Russian Deputy Finance Minister, the importance of the traceability of money flows and crypto transactions. He also emphasized the responsibility of financial institutions, including banks and exchange platforms, to fully comply with AML requirements, which is seen as a crucial factor for the crypto world entering the Russian market.
The upcoming regulation aims to protect investors.
The recent legislative developments in Russia are seen positively by industry players, especially compared to the May 2021 ban of crypto mining in China. While governments are taking steps towards introducing a regulatory framework for the crypto market, crypto blockchain analytics and forensic tools will play a significant role in supporting crypto platforms to meet their compliance obligations.
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