Experts warn of bitcoin-investor outflow amid Bank of Russia crypto ban proposals

Cryptocurrency investors would be forced to leave Russia if the Bank of Russia’s proposed bills on banning the circulation of cryptocurrencies and penalties for violations mentioned in the media are approved. ForkLog said this, citing experts surveyed.

The main issue that puzzled lawyers about the widely circulated information in the media is that the Bank of Russia does not have the right of legislative initiative.

“The Bank of Russia does not draft bills; that is the job of the State Duma. The Bank can only offer its opinion, which deputies are free not to accept,” – explained Andrey Tugarin, managing partner of GMT Legal.

Currently, Russia does not have a legal framework that differentiates digital currencies into categories, including “private.”

“What exactly falls under the category of private digital currencies, in the regulator’s view, is very hard to say, and for now it looks like an imprecise expression of the regulator’s opinion,” said Tugarin.

The central bank’s initiative, presumably, may be tied to a desire to protect the digital ruble preparing for launch.

“But by its nature the digital ruble has nothing to do with crypto and should be regulated separately,” emphasized a lawyer.

Andrey Tugarin reminded that the possibility of issuing and circulating digital currencies is enshrined in the law “On Digital Financial Assets.”

Unclear formulations were also raised by CEO Sergei Mendelyev of Indefibank.

“We still need to understand what is meant by ‘private digital currencies’. If we mean the so‑called shitcoins like Phoenician cyfrons, one can only support the Bank of Russia. And if here we get truly respectable tokens from projects and startups, well, we will trade them outside Russian jurisdiction. I still don’t know where in Moscow you can buy COMP tokens for cash. What ‘issuing crypto on the territory’ means will also be funny to read,” he told ForkLog.

Architect and founder of the project “Robonomics” Sergei Lonshakov stressed that it all depends on how thoroughly the Bank’s rules are applied.

“If participating in developing a protocol that uses its own token is treated as participation in issuance, then all the capable blockchain developers who work on dozens of international projects will flee Russia. And the fact that one cannot, for example, create tokens on behalf of a Russian legal entity, — well, fine,” he said.

The Bank of Russia does not seem inclined to abandon the idea of a complete ban on crypto, according to expert Efim Kazantsev of the Moscow Digital School. And since “ban it all and right away” could not be achieved by the regulator, it will try to slice sectors until any cryptocurrency is banned for all subjects of the Russian Federation.

“This initiative is ruinous for Russia’s crypto sphere. If we want to create conditions for the development of crypto projects, such bills must not be allowed,” said the expert.

Experts also point to the confrontation between the Bank of Russia and the Finance Ministry on crypto regulation — the ministry advocates regulation of the industry. Finance Minister Anton Siluanov compared the idea of banning crypto assets with banning the Internet and said that this is impossible.

“Much of the financial and economic bloc has already openly signalled that banning crypto in Russia is not in anyone’s interest; on the contrary, it deprives the country of prestige and budget revenues. And only from Neglinnaya do calls to: ‘Ban it!’, ‘We won’t allow it!’, ‘Threat to financial stability’ and other scare stories keep echoing,” said Mikhail Bystrov, partner and head of FinTech & Crypto practice at law firm DRC.

In his view, the maximum that the Bank could achieve is a ban on using cryptocurrencies as an official means of payment in the Russian Federation. On this issue, the Finance Ministry agrees with the regulator.

Representatives of the cryptocurrency exchange Binance, which on 18 February joined the expert council at the Association of Banks of Russia, said that regulation of the market rather than a ban will create mechanisms to protect the rights of individuals and businesses.

“A ban on disseminating information about cryptocurrencies and their issuance in Russia, as well as a ban on ownership, completely contrad icts protecting citizens and businesses. We support the government-approved concept and the Finance Ministry’s stance on regulating the crypto market. A ban will only foster the growth of the shadow market,” Binance said.

As reported by several media outlets, citing their own sources, the Bank of Russia is preparing two bills to ban the circulation of “private digital currencies” on the territory of the country and fines of up to 1 million rubles for non-compliance.

The regulator also proposes making cryptocurrency advertising illegal.

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