Bank of Russia criticises Finance Ministry’s plan to regulate the cryptocurrency market

Following the review of the Finance Ministry’s proposed concept for regulating the crypto market in Russia, the financial regulator expressed concerns that a single bank could become the organizer of the country’s digital-currency exchange system. The Interfax news agency reports, citing correspondence between the Bank of Russia and the ministry.

Representatives of the Bank of Russia concluded that the concept places responsibility for the risks ПОД/ФТ on a “single” Russian bank. In the regulator’s view, this could raise questions from the standpoint of competition development.

The Finance Ministry rejected this assertion.

“Under the organizer of the system for exchanging digital currencies within the concept, Russian credit institutions are understood. Proposals that the organizer should be a single participant were not voiced by the Finance Ministry, and they are also absent in the concept. Thus, on the contrary, competition in this area is expected to develop,” the ministry said in its reply.

The Bank of Russia also questioned the effectiveness of the proposed ‘Transparent Blockchain’ system for identifying suspicious and high-risk crypto transactions:

“Cryptocurrencies, originally developed to enable anonymity, cannot be transparent; they require special technologies to ensure anonymity.”

According to the regulator, banks currently perform checks only in the traditional financial-asset environment, and shifting responsibility for control procedures onto them in the crypto market would merely increase risks.

In response, the ministry argued that only banks that develop appropriate procedures and train staff will be allowed to work with digital currencies.

“Overall, the argument for banning a new, promising asset on the grounds that banks have not previously worked with them and thus lack experience does not seem obvious. Under this logic, no new asset could be adopted,” added the Finance Ministry.

In addition, the Bank of Russia criticised the proposal to separate investors by qualification through testing.

“The price of cryptocurrencies is determined predominantly by speculative factors, so financial literacy will not help investors avoid risks,” the Bank of Russia believes.

The Finance Ministry, however, noted that many existing complex financial instruments are subject to significant speculative factors, and cryptocurrency provides broad opportunities for analysis. For example, one can use statistical data on price, volume of use, regulatory situations in individual countries, and the volumes of entry and exit by large institutional capital.

The Bank of Russia proposes to ban the circulation and mining of cryptocurrencies on Russian territory. The Finance Ministry, in turn, advocates regulating the industry. The concept they proposed has already been approved by the government. Read its in-depth analysis on ForkLog.

Both state structures support a ban on settlements in cryptocurrencies within the territory of the Russian Federation, while the ministry is at odds with the financial regulator on the question of ensuring the legality of crypto-asset turnover under state control.

According to analysts’ estimates, if the market is legalized, even under a simplified tax regime, the tax take could reach up to 1 trillion rubles per year.

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