Experts: Bank of Russia’s announced restrictions would hit Bitcoin exchanges and miners

The current draft of Russia’s law “On Digital Financial Assets” (DFA) does not prohibit owning cryptocurrency, so the Bank of Russia’s statements about planned restrictions for operations with this asset class infringe citizens’ rights. If restrictive measures are implemented, the most affected category will be users of P2P platforms and the OTC platforms themselves. ForkLog said this, according to experts surveyed.

The Bank of Russia has repeatedly emphasised that it recognises no digital currency other than that which is guaranteed by the regulator itself. Therefore, plans to create a mechanism for blocking bank payments to Bitcoin exchanges are driven by a desire to strictly regulate the circulation of cryptocurrencies, says Andrey Tugarin, managing partner at GMT Legal.

However, to implement the blocking, a credit institution must at minimum have reason to believe that such a purchase violates the current Russian legislation, explains the lawyer. More often this concerns violations of Federal Law No. 115 \”On Counteracting the Legalization of Proceeds of Crime\”.

«The current law \”On DFA\” allows every Russian citizen to own digital currency, of which Bitcoin is, to buy or sell it and use it as an investment. And this right extends regardless of whether the buyer is a qualified investor or not. At the moment there is no legal mechanism in Russia to block a bona fide transaction involving digital currency», – Tugarin.

Among the central bank’s stated goals is to fight against \”emotional purchases of cryptocurrencies\”. Explanations on how these will be distinguished from \”non-emotional\” purchases have not yet been provided.

Most negative legal consequence of the initiative, Tugarin says, would be the likely emergence of a legal collision:

«To date, the Ministry of Finance and the Federal Tax Service plan to collect taxes on profits from transactions with digital currencies. On the other hand, the Bank does not recognise digital currency and calls for blocking such operations».

The lawyer expressed hope that the regulator will refine the recommendations so that they do not restrict the rights established by law.

«In all countries where cryptocurrency has been given a legal status, the central bank does not block transactions, but instead creates conditions under which these operations are possible and legal. This, in turn, allows the local financial regulator to carry out its work on tax collection», – noted Tugarin.

The mere fact that such amendments are being discussed is a highly negative signal, and the consequences of almost any restriction will be catastrophic for the Russian crypto market, argues Nikita Zuborev, senior analyst at BestChange.ru.

«The most affected segment of business will be off-exchange trading registered on Russian territory — exchange points and users of P2P platforms. Miners will also have to seek workarounds to keep farms running — selling mined tokens for rubles will become a problem», – noted him.

According to him, creating artificial restrictions on access to cryptocurrencies for ordinary citizens effectively curtails the freedom of all residents.

Experts found it difficult to assess how the final blocking mechanism will work, but, drawing on the central bank’s existing methodological guidelines, they expect monitoring of abnormal activity on customers’ bank accounts.

«They will check the quantity, frequency and size of transactions in search of customers with profiles similar to those of exchange-point administrators. And restrictions will apply to all services without exception, even those with no dealings in cryptocurrencies, they are very similar in profile», – enumerated Zuborev.

Cryptocurrency exchanges that operate legally have special accounts, and the agency won’t even have to track them, he continued. Active users on P2P platforms are already suspicious — not only under the Bank’s latest methodological guidelines but also under Federal Law No. 115. Blocking transfers found this way has already been implemented in banks.

«Rare individual transactions will likely go unnoticed. For one or two transfers per month to the address of a possible crypto-exchange, the account will not be blocked. But more active traders will need to show ingenuity to continue their work», – noted the analyst.

According to available information, so far representatives of crypto-exchanges have not reported a decline in ruble-denominated operations.

If the Bank of Russia, at the legislative level, decides to restrict access to digital currencies, it will begin by blocking resources through which users buy and sell cryptocurrency and exchange information, argues Artem Kozlyuk, head of the public organisation «RosKomSvoboda».

«Blocking transactions themselves will be too difficult at this stage. Primarily they will add crypto-exchanges, crypto-bourses, their domains and web services to the list of prohibited sites. It is also possible that cloud resources used by various decentralized platforms will fall under the scope», – clarified he.

The expert did not rule out that information resources devoted to cryptocurrencies could also be blocked.

«Many exchanges have already been blocked. At present this is illegal; there is no prohibition on disseminating information about cryptocurrency in any form. These are court decisions achieved, among others, by the lawyers of our organisation», – said Artem Kozlyuk.

Financial monitoring of banking operations, prescribed in Federal Law No. 115, will also affect crypto-transactions, he suggested:

«Information about which addresses, exchanges and exchangers users send money to will also fall under the Bank of Russia’s interests. By tying MCC codes one can explicitly identify which platform the funds went to. Or if the same user actively sends money to certain addresses, tracing connections from a person to a crypto exchange is also quite possible».

In general, until the Bank of Russia’s position is legislatively enshrined, enforcement practice regarding cryptocurrencies will be situational, warns Artem Kozlyuk:

«In the absence of formed legislation, investigators, courts and supervisory bodies will decide on a case-by-case basis whether a particular crypto-transaction is money, investments, a monetary surrogate or something else».

Dated remarks: Maria Stankevich, Director of Business Development at the EXMO exchange, believes that although the initiative is tough, the regulator’s aim is noble.

«It’s no secret that through exchanges and private individuals a huge amount of cash (and not only) changes hands. On the one hand no one checks the source of funds or the origin of fiat funds, and on the other hand such an exchange is often unsafe for the buyer», – explained she.

Similar restrictions, according to Stankevich, operate in the United Kingdom, where banks and other institutions do not allow transfers to buy cryptocurrencies from unregistered crypto companies.

«The problem is that the Russian state not only does not enable buying cryptocurrency from registered exchanges, since such a concept does not exist in the law, but also does not explain how safely citizens can buy currency and on which exchanges», – said the expert.

In recent weeks, EXMO has not noticed a decline in deposits from Russian users. On the contrary — volumes of trading and deposits have risen significantly.

«I relate this to a market correction; most people were trying to top up their portfolios with cryptocurrency at lower levels», – noted Maria Stankevich.

Earlier, experts assessed the probable consequences of blocking bank transfers to the accounts of Bitcoin exchanges in Russia. Among other things, they did not exclude that this could push up the price of leading coins.

Subscribe to ForkLog news on Telegram: ForkLog Feed — all the news, ForkLog — the most important news, infographics and opinions.