Bank of Russia drafts amendments to the ‘On Digital Financial Assets’ law to ban cryptocurrency circulation in Russia

The central bank again compared cryptocurrencies to a financial pyramid and stated that legalising them would create conditions for increased investment in such assets. The regulator is confident that these risks would not be reduced even the proposed limits for non-qualified investors set by the Finance Ministry.

The Bank believes that the division of depositors into qualified and non-qualified makes little sense in the Bitcoin market, as price dynamics depend on speculative factors.

If this market is legalised, investors will face an “illusion of state protection,” notes the Bank of Russia.

The regulator also sees no benefits for Russia from mining. In the central bank’s view, the competitiveness of this industry in Russia is primarily tied to cheap electricity, and the development of cryptocurrency mining threatens power supply to enterprises and residential facilities.

In addition to the letter, the Bank has sent to the Finance Ministry a draft amendments to the law on digital financial assets (‘On DFA’).

The Bank proposes to prohibit physical and legal entities from activities that “facilitate the organisation of the issue and circulation of private digital currencies” both on the territory of the Russian Federation and abroad.

The amendments also envisage a ban on ownership of cryptocurrencies by financial organisations.

Moreover, the Bank wants to ban dissemination of information in the Russian Federation about accepting digital currencies as a means of payment, the organisation of their issuance and circulation.

Under the regulator’s proposals, banks will have to refuse transfers if there is information that the recipient was involved in the issuance or circulation of cryptocurrencies. Similar restrictions are proposed for telecommunications operators and postal services.

Recall, the Bank has taken a radical prohibitive stance on cryptocurrencies and their mining.

The Bank has consistently criticised the Finance Ministry’s proposed regulatory concept. Nabiullina said that it only creates new risks for the welfare of Russians and financial stability.

In the Finance Ministry say that their concept takes into account all risks raised by the Central Bank. The two sides have so far not been able to reach a consensus on regulating the industry.

Read more about the ministry’s concept in our coverage:

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