The Bank of Russia’s proposed full ban on the circulation of cryptocurrencies within the country will inevitably provoke an outflow of talent and capital from the economy, but the established market will not be killed. This is what ForkLog told experts surveyed.
Sergey Mendeleev, CEO of Indefibank:
I see the main consequences not for the market, but for our future, as this is another step toward the country’s hopeless technological lag. To ban the technology is to lose all personnel in this field—entrepreneurs as well as developers-programmers, as well as financiers, not to mention simply talented and ‘driven’ entrepreneurs.
This also means a loss of investments, including from leading international funds, which will reflect very negatively on the country’s economy. All of this, in turn, will lead to a further outflow of young and talented people from the country, even those not involved in crypto. Finally, this will deal a serious blow to the welfare of investors—funds, financial institutions, and citizens who will lose the opportunity to invest in one of the most profitable and promising segments.
While Singapore, Zug, Miami, Dubai, San Francisco, New York, Paris and London will reap all the advantages of openness to crypto, Russia with its enormous potential in human capital will ship all this capital for free to neighbouring countries. One could go even further and ban electricity — this would instantly resolve all questions around transport and tariffs, as well as opposition videos on YouTube. Let us leave a radio in every apartment and read ‘Truth’ by the light of candles bought at the ROC.
As for the cryptocurrency market, in the ranks of seasoned crypto enthusiasts (as Anatoly Aksakov, head of the State Duma’s Financial Market Committee, likes to call us) there is some optimism about such news, because the established market will not be killed by it, but will free it from the surge of youngsters and will push fees back to the 2016-2017 levels. High risk — high reward, nothing new.
Holders of cryptocurrencies can be advised the same as they have been for years—to keep both crypto and fiat on wallets. Cryptocurrencies were created to resist a state with its idiotic bans. The proposed restrictions do not affect foreign crypto exchanges’ ability to serve Russian users, but even if such a measure ends up in the final document, it would be just a three-hour drive to the Belarusian border. Over there, near the border post, there is already a Belarusian casino, so we will open a Belarusian crypto-exchange opposite it. I am personally ready to invest in its opening.
Anatoly Kaplan, founder of ForkLog magazine:
It is worth noting the regulator’s consistency in actions and statements, and also thanking for the extra publicity for cryptocurrencies and related technologies. Obviously, what is being considered by the central bank contradicts the actual state of affairs, as demonstrated by the raids at the Federation Tower at the end of last year.
Accordingly, the central bank’s statement is merely an act of drawing attention to the existence of an organisation that, in reality, is not capable of controlling or fully understanding any of what it discusses.
Binance’s stance:
The Bank of Russia has voiced a position of a complete ban on cryptocurrencies and mining in the country, arguing that their spread poses threats to citizens’ welfare, financial stability, and risks associated with illicit activity.
Binance, through cooperation with the public and private sectors, goes beyond industry standards to identify cryptocurrency transactions linked to money laundering, proceeds of crime and terrorist financing.
We block users from regions under sanctions, doing so with the help of various tools and KYC/AML-solution providers.
We are ready to discuss the theses of the consultative report and hope this will mark the start of a dialogue between the Bank of Russia and representatives of the crypto market.
Eduard Davydov, partner at international law firm NOA Circle:
Under the influence of the central bank there is a chain “fiat — cryptocurrency.” The central bank has no ability to restrict the circulation of the cryptocurrency itself. However, acquiring new tokens or coins by the classical and most popular method, charging money from a card, will become impossible or difficult.
The consequences for crypto holders depend on whether the prohibition covers only acquiring new coins (tokens) or also selling them within Russia. If holders of digital assets retain the ability to sell them on overseas exchanges, then over time cryptocurrency will exit Russia, since the flow will be one-way.
Moreover, restricting the flow of cryptocurrencies that do not touch fiat is beyond the Bank of Russia—here stricter measures from other authorities would be required, measures that in a legal society are hard to imagine.
Despite estimates by the lower house that Russians invested 5 trillion rubles in the crypto market, about 5% of GDP in 2021, the proposed actions by the Bank of Russia will not affect the economy, since there are virtually no budget revenues from crypto operations due to lack of a legal framework. However such measures should be viewed as a move away from a free market in general.
On the other hand, a ban would affect citizens themselves, especially those who invest a significant portion of their wealth in crypto assets. With a full ban they may face difficulties liquidating their cryptocurrency in Russia and will have to seek other ways to exit into fiat.
Dmitry Machihin, founder of Bitnalog.com:
Absolutely nothing new. The Bank of Russia adheres to its line, while most state structures advocate regulation. Everyone wins from this. In the case of a ban, the authorities would harm only themselves.
Maria Agranovskaya, managing partner of the law firm Grad:
The Bank of Russia has taken a completely non-constructive position, with no analogues in developed countries, nor adequate justification, including legal.
Moreover, this position contradicts fundamental constitutional principles and the basics of civil law: everyone has the right to own property, including digital currency, and to deal with it as they see fit.
I consider the ban and restrictions lobbied by the central bank unfounded and ill-considered.
Mikhail Tretiak, partner, head of the IP/IT practice at the law firm DRC:
Since 2014 the Bank of Russia has repeatedly voiced a hard position that cryptocurrencies are a monetary surrogate and their circulation should be banned. The reason for this position is clear: the central bank does not want to regulate uncontrolled and complex cryptocurrencies, but wants to implement a fully controllable digital ruble.
In general, the volume of banking operations related to cryptocurrencies may amount to as little as 2% to 5% of the total turnover of digital assets in Russia. Accordingly, a full ban on operations, if we mean only banking operations, should not have a significant impact on the market.
Finally, such an approach — a full ban on operations to deprive a selected category of citizens of funding — is, pardon me, cannon-fire at sparrows. Instead of introducing normal regulation of crypto business and its taxation (and the vast majority of Russian crypto enthusiasts want to operate under clear and transparent rules), the central bank hints again that it will not tolerate competition from the digital ruble, does not wish to deal with the issues, and does not want to be regulator.
This stance not only does not do the Central Bank credit but may deprive the Russian budget of tax revenues from crypto business, since it will not tolerate it for long and, given its mobility, will emigrate at the first opportunity. In other words, a country with such an approach could lose far more than it gains.
Read more about the Bank of Russia’s report “Risks of cryptocurrencies and possible regulatory measures” in ForkLog’s special material.
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