Tighter oversight of P2P transfers by the Bank of Russia could boost the popularity of cryptocurrencies as a less controllable payment channel by authorities, but it would hinder market legalization, according to experts polled by ForkLog.
Media reported that the Central Bank of Russia has since 2022 tightened supervision of illicit operations through banks. Later the regulator clarified that this is not a matter of total control over individuals’ money transfers — the BoR will collect anonymized customer data where there is a risk of using banking platforms by cryptocurrency exchangers, online casinos and bookmakers.
The initiative is fully in line with the regulator’s course to strengthen oversight of transactions. In September the Central Bank defined criteria that will allow banks to identify cards and electronic wallets used by shadowy businesses. Even then, the central bank classified as such cryptocurrency exchangers, illegal online casinos, financial pyramids, and illegal forex dealers.
As of October 1 changes in Regulation CBR 375-P, according to which operations related to the turnover of digital currencies are by default considered suspicious.
This regulatory act is binding on banks without exception, and financial institutions have the right to block accounts on this basis, lawyers note. Already now there have been more frequent cases of account blocks for cryptocurrency holders; the new measures by the Bank of Russia could increase their number.
Recently, the Bank of Russia’s rhetoric toward cryptocurrencies has grown significantly harsher.
In the central bank they stated that they see no place for crypto assets in the Russian financial market, and various sources report that the regulator intends to prohibit investments in Bitcoin. Regarding the discussion of various regulatory options for the industry — from a full ban on owning and purchasing digital currencies to the legalization of Bitcoin exchanges — also said by Anatoly Aksakov, head of the State Duma Committee on the Financial Market.
«The situation could reach absurdity where by law cryptocurrencies are legal property, but exchanges and even transfers from foreign exchanges are blocked,” said ForkLog analyst at EXANTE Viktor Argonov.
According to Bank of Russia, the volume of residents’ cryptocurrency operations annually amounts to around $5 billion. Experts say that Bank of Russia’s measures are long-term aimed at increasing tax collection and boosting the budget.
«Such actions could bring hundreds of billions of rubles to the budget. It should be noted that the market includes not only traders who buy cryptocurrency as a long-term investment, but also miners, who could bolster the budget and operate in the legitimate space», said Vladimir Smerkis, founder of the blockchain community Definition.
He also noted that many users currently perform P2P transactions precisely because this is one of the few permissible, not prohibited by law, ways to trade crypto assets.
However, intensified monitoring of individuals’ transactions rather than increasing the legality of financial flows in Russia may have the opposite effect — cryptocurrencies could move from the ‘grey zone’ to the underground, where their popularity would rise amid eroding trust in the state, experts note.
The consequence of BoR measures could be a shift of funds to other, more anonymous fiat payment systems outside Russian jurisdiction, as well as into cryptocurrencies.
«Moving to cryptocurrencies is technically more complex, but only until citizens start looking at them. In the West, payment systems like PayPal are increasingly merging with crypto. Legally or not, but this process will affect Russia as well,” Argonov said.
CEO of Indefibank, Sergey Mendeleev, believes that formally the central bank’s monitoring will not affect cryptocurrency holders:
«No central bank can (and cannot) regulate P2P transfers in crypto — crypto was, after all, created for this purpose».
Advisor at Lidings, Moscow Digital School lecturer Dmitry Kirillov noted that for crypto asset owners BoR monitoring poses a danger specifically in the area of cashing out via classic Bitcoin exchanges:
«The regulator may view the systematic nature of such transfers without documentary substantiation as a sign of illicit banking activity. In such a situation exchanging crypto assets and withdrawing fiat from a regulated crypto exchange becomes safer».
Because in most cases buying and selling cryptocurrencies in Russia is conducted via card accounts, a large number of crypto enthusiasts may switch to cash settlements, said partner and head of IP/IT practice at DRC, Mikhail Tretyak.
Another reason for crypto holders leaving traditional payment channels such as banks could be the laws announced by the Russian Prosecutor General’s Office, which provide for the confiscation of digital assets. The necessity of this was also discussed at the Investigative Committee.
«As a result, the Bank of Russia, together with the security bloc, yet again, trying to crush the Bitcoin market, shoots itself in the foot. Instead of clear regulation with taxation options, the BoR effectively forces the crypto industry to move entirely into the shadows, or even to emigrate from the country», said Tretyak.
Now the Russian crypto community faces a choice — either fully legalize their operations, or continue to stay ‘in the shadows’, says Andrey Tugarin, managing partner at GMT Legal.
The first option implies verification and substantiation of the source of funds and economic rationale for transactions, account verification on crypto platforms, and willingness to fulfill tax obligations.
«We recommend that crypto-asset owners pursue the first, legal path to enter the legitimate field. This will foster the development of transparent and clear regulatory framework for the industry, which is currently much needed», said Tugarin.
In the second case, the chances of account blocks and other negative sanctions when implementing ‘grey’ schemes increase, the lawyer noted.
Earlier, in September the Bank of Russia announced the creation of a mechanism to block payments to crypto exchanges and exchangers. In December, the media reported that the BoR was considering blocking card transfers by certain MCC codes to restrict investments in crypto assets.
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