The government-approved concept for regulating cryptocurrencies is far better than the Central Bank’s proposed ban, but it risks a total loss of anonymity and the infrastructure becoming tied to banks, according to experts surveyed by ForkLog.
The presented concept mainly concerns cryptocurrency exchanges. It does not address other operations or accountability for the use of wallets and platforms outside the described infrastructure, according to lawyers. The document also contains no provisions on mining.
“The concept covers only the activities of buying/selling and exchanging cryptocurrencies. And, basically, it’s understandable why — this sector is the most tax‑paying in terms of taxes,” said Mikhail Bystror, head of the fintech- and crypto-practice at the law firm DRC, to ForkLog.
The authorities estimate taxes from the cryptocurrency market, even under a simplified regime, at around 1 trillion rubles per year.
Cryptocurrencies are recognised as akin to currencies rather than digital financial assets (DFA), and their regulation largely mirrors currency law. On the question of organizing the issuance and turnover of cryptocurrencies separately from DFAs, as early as 2020, Anatoly Aksakov, head of the State Duma committee on the financial market, “said” said.
One of the key points of the concept is routing transactions through the banking infrastructure.
Banks will effectively take on part of the functions of cryptocurrency exchanges and exchangers, says Yanis Kivkulis, a leading strategist at EXANTE:
“Delegating crypto services to banks — this is, undoubtedly, a step toward greater convenience and legal protection for market participants. But the downside of this measure is the loss of users’ anonymity.”
Dmitry Machihin, founder of Bitnalog.com, believes that conducting transactions through banks will significantly complicate work with digital currencies, and regulators’ required measures can be implemented without this.
Market participants are unlikely to use such infrastructure, said Sergey Medeleev, CEO of Indefibank:
“Grandmas, of course, find it convenient, but they don’t know what Bitcoin is, and no normal crypto user would store it in banks — it is simply ridiculous.”
Managing partner Andrey Tugarin of GMT Legal believes that creating an additional entity as the organiser of the digital currency exchange system is not fully justified, as it would lead to extra bureaucracy.
In his view, the correct step would be to create an entity such as the “operator of digital currency”, set licensing requirements for it and allow any organisation to acquire this status, not only credit institutions.
To become the organiser of the digital currencies exchange system, a bank would need a universal license. Its issuance, as with the base license, is handled by the Central Bank. Concentrating such a large volume of powers under the supervision of a single body risks corruption, Tugarin says:
“Moreover, this could lead to total monopolisation of the market. In Russia, two or three banks would create an information system for exchanging digital currencies and would entrap all digital currency operations for themselves. Such a scenario is unacceptable.”
It is also unclear what protection wallet holders would have if a bank goes bankrupt or faces sanctions. In addition, lawyers fear that those acting as system organisers might treat cryptocurrency operations “overly conservatively” and effectively make them impossible.
“They will have powers to do this, but the procedure for challenging banks’ actions in the concept is absent,” said ForkLog adviser at Lidings and lecturer at Moscow Digital School Dmitry Kirillov.
The concept also reflects the authorities’ intent to anchor foreign market participants in Russia. Binance reiterated to ForkLog its readiness to open a branch, a representative office, or a separate legal entity with registration on the Roskomnadzor site if necessary. Other exchanges have previously said they would consider all options to continue operating in Russia.
Nevertheless, the document does not detail the registration requirements for both Russian and foreign exchanges and trading venues.
In the preamble, the concept mentions “financial safety cushions” in the capital of trading platforms, but the terms for compensating client losses are not disclosed, and scam risks remain, notes Dmitry Kirillov.
The new measures are unlikely to cleanse the market of illegal transactions, says Yanis Kivkulis:
“However, they will create new opportunities for those who want to operate openly. From this pool of users, taxes can be collected transparently, and startup founders will feel more confident thanks to greater clarity.”
Overall, experts note that even such a concept, which envisages strict market regulation, is better than the Central Bank’s ban.
Representatives of the cryptocurrency exchange Binance said they support the government-approved document.
“We would like to note the legislative regulation of the turnover of digital currencies, which is set out in the concept. It is regulation, not a ban, that will legalise the market, and thus create for the state mechanisms and opportunities to protect the rights of individuals and legal entities,” said ForkLog’s GR director for Binance in the CIS, Olga Goncharova.
She also noted that the approach to requirements for operators of crypto exchanges stimulates competition, which presumably will lead to the provision of higher-quality services and products for users.
“Another important point in the approved concept is that it fits organically into international regulation, assuming mandatory KYC/AML checks laid out by FATF,” said Goncharova.
Full identification of users of exchanges and exchangers is standard worldwide, and paying taxes on profits while not engaging in illicit activity is what the vast majority is prepared to do, noted Dmitry Machihin.
“In the Russian crypto market, users will come who see cryptocurrencies not as a means to launder or hide capital, but primarily as a vehicle for investment and savings. Of course, shadow capital will remain, which users prefer not to reveal,” said Yanis Kivkulis.
Nevertheless, some industry players believe such regulation will not significantly affect ongoing market dynamics. Sergey Medeleev compared it with the “currency market in the USSR”:
“The issue is only how stringent the penalties for violating the law will be. And even then it will affect only the price of risk for people who, as before, provide citizens with access to free cryptocurrency, bypassing odd intermediaries in the form of authorised banks.”
Earlier, after the Central Bank proposed banning the turnover and mining of cryptocurrencies in Russia, many officials opposed this initiative.
In the Finance Ministry, it was stated that the market should be regulated, not banned, and they presented their own concept. It was supported by the government.
It is expected that the Finance Ministry and the Central Bank will submit a bill regulating cryptocurrencies by 18 February.
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