The Central Bank of Russia, Rosfinmonitoring, and five major banks are conducting a pilot project to establish connections between users’ fiat and cryptocurrency transactions. This was reported by RBC, citing a statement from Ilya Bushmelev, Director of Project Portfolio Management at Innotech.
The new service, “Know Your Crypto Client,” aims to train credit institutions to identify cryptocurrency transactions conducted by their clients.
Among the tools being used is Rosfinmonitoring’s “Transparent Blockchain.”
The testing will continue until the end of May, but may be extended indefinitely depending on the results.
“The pilot should result in a basic understanding of the necessary actions and tools for credit institutions regarding crypto compliance, the ‘Know Your Crypto Client’ procedure, and ‘Know Your Crypto Transaction,'” noted Bushmelev.
According to him, the experience gained will be considered in market regulation.
Dmitry Machikhin, founder and CEO of BitOK, is convinced that Russian authorities lack a functioning product for analyzing cryptocurrency transactions.
“The product has been attempted to be launched for seven years under different names to avoid a bad reputation. Besides press releases meant to intimidate the audience and empty pilots, nothing actually exists,” he stated in a comment to ForkLog.
According to Machikhin, state services have encountered technical difficulties in implementing the tool. Banks use their own algorithms tied to fiat, without paying attention to on-chain activity. The risks of cryptocurrency origin are also not investigated, and there is no check for AML/KYT, as this is the prerogative of exchanges and exchangers.
“At the moment, [cryptocurrency holders conducting transactions using bank cards] have nothing to fear, because the service physically does not exist and therefore cannot fulfill its tasks,” concluded the expert.
ForkLog reported in October 2023 that Russian authorities were working on implementing technology to analyze citizens’ crypto transactions within the country. At that time, testing was conducted at a single bank.
Earlier, the Central Bank reported a high level of Russian involvement in the crypto market, estimating the turnover of such assets for 2023 at 4.78 trillion rubles ($54 billion).
Rosfinmonitoring explains the need for control by the increasing number of suspicious operations with digital currencies.
Back in September 2021, the Central Bank of Russia classified operations with crypto exchanges as suspicious and recommended that banks conduct thorough monitoring. In cases of suspected money laundering, credit institutions are advised to block client operations and even terminate contracts.
The regulator also announced plans to develop a mechanism for blocking payments to cryptocurrency exchanges and exchangers.