Russia will have no P2P crypto market
Dmitry Machikhin on Russia’s P2P clampdown and what it means for crypto users.
Russia’s latest legislative initiatives threaten to wipe out the market for P2P crypto transactions. Even so, this opens opportunities for exchangers, and there is no move to ban digital currencies outright. ForkLog discussed the current state of Russia’s crypto market with Dmitry Machikhin, founder of the AML service BitOK.
ForkLog (FL): One item in the government’s proposed amendments is fines for accepting cryptocurrencies as payment for goods. What are the authorities trying to achieve?
Dmitry Machikhin (D. M.): The state’s monopoly on issuing means of payment is the Rubicon for virtually any central bank. In Russia the ruble is legal tender, which means any other means are, by definition, outside the law, including dollars. That is where the Bank of Russia stands very firmly.
FL: So a private purchase of a car for bitcoin is of little interest to the central bank, but a shop cannot accept crypto at the till?
D. M.: Yes. The most interesting thing is that, as with dollars, I can sell something for bitcoin by stating this in a free-form contract. The law does not forbid me to do so.
So the ban mostly concerns official, white payments: I cannot pay in e-commerce checkouts, cannot pay physically for a product, cannot, as a business, use it officially as a means of payment—yet I can still, de facto, settle with it.
FL: In other words, Sberbank cannot pay salaries in USDT, but a small business might?
D. M.: I may surprise you, but Sberbank can pay salaries in USDT—however, the person must be abroad, not a resident of the Russian Federation, and it must not exceed 25% of their pay. There’s such a thing in the Labour Code. It does not say Tether outright, it says something like “by any means”, even shells.
FL: Can an ordinary citizen use Sberbank to pay for a USDT purchase?
D. M.: Until recently, no, but who knows. Perhaps the power of On-Ramp and Off-Ramp will reach those who can, even when they can’t.
FL: You mentioned tracking illegal transactions. How will that be organised?
D. M.: Chain-building relies on graph structures. The BitOK product is built on the same methodology. It helps investigate incidents—mostly to recover stolen crypto, find where the coins went and where they came from.
For state monitoring in Russia and the CIS, a “Transparent Blockchain” has been created. It helps investigate crypto-related crimes. There is an opinion that it will also be used to track down P2P actors and tax evaders.
FL: Does “Transparent Blockchain” actually work?
D. M.: I don’t know. Given the amount invested, there’s probably something there. This product is designed solely for a specific task for a specific group of people. How well it works will be clear from the number of solved criminal cases, tax summonses and other unpleasant stories.
FL: In your Telegram channel you mentioned a dispute with Sergey Mendeleev. What is it about?
D. M.: We have been arguing for four years about whether crypto will be banned in Russia. I say it won’t. I think Seryozha has already lost; he thinks I have.
For him, a ban is a ban on payments and on organising circulation. I think a ban looks different—like in China, where for the word P2P you can go “on the bottle”.
FL: Amendments to the law on “droppers” and the planned cap on the number of cards per person will make an already problematic P2P segment worse?
D. M.: Every problem in P2P opens new opportunities. They’re being given a hint that this market will not exist—that’s already clear.
Look at it from another angle; try other business models. Let a hundred P2P exchangers chip in, obtain all the necessary permits and open a bank.
Stop banging your head against a concrete wall. There will be no P2P.
FL: For an ordinary person who cashes out a crypto salary, will anything change soon?
D. M.: I don’t yet see a total chokehold with no withdrawal options—though there are fewer of them. And if we’re talking about crypto-fiat interaction, P2P is not the best tool. But more tools will appear soon, including for Russian citizens.
FL: Telegram channels say the tax service has started asking about P2P operations. Is that true, how do they learn about transactions and can you hide from it?
D. M.: The trend began a couple of years ago. I don’t know how large it really is. You know how some public channels work—two people get called in, and they write that everyone will be jailed. Keep a cool head.
I think it’s too early to panic. Banks first have to deanonymise the client—they do this reluctantly, at the behest of Rosfinmonitoring and the central bank. Only then does the case get reported to the tax authorities.
The chain is long. Technologically, it all works far from perfectly. And they are, most likely, interested in large turnovers that fall under some sort of commercial activity.
FL: Do P2P operators who shuttle rubles back and forth break anything?
D. M.: Even moving rubles back and forth is seen as illegal, because it’s activity without economic sense. If you have some movement, you have turnover, which means you’re earning.
You didn’t report it and didn’t register as a legal entity. If it’s a legal entity, what activity is it? If it’s banking, why aren’t you a РНКО? And 800 more questions. Killing P2P, if you have data on a group and its turnover, can be done with a snap.
FL: The central bank’s proposed “Crypto Basel” tightens rules on banks’ crypto operations. Can banks even work with crypto here?
D. M.: Officially, no. But banks, being centres of capital, long ago realised it’s one source of profit. If the law directly forbids it, they use affiliated structures. Note that until 2022 there was Sbercrypto in Switzerland.
This law is aimed slightly at the future, but what it covers merely says that additional reserves are needed—that you must meet the Basel standard and manage risks associated with volatile capital.
FL: Is that a boost for the industry? Will users get more on-ramps?
D. M.: No. To see what a boost looks like, look at how legislation is evolving in Hong Kong and the United States. How many firms went there after certain crypto initiatives were announced, and how many more will come.
Here we’re seeing a “change of shoes in mid-air”—on the one hand to ban, on the other to allow. But I see a strategy in this and take it positively.
FL: Has your personal interaction with crypto changed with all these updates?
D. M.: Of course. I’ve twice been in the “triangle” and don’t want a third time. Once in the “black triangle”, where there’s criminal liability—thank God, not as a suspect. The second time was a lighter scheme.
FL: Is it easy for a “triangle” victim to prove innocence, or does it cause serious problems?
D. M.: It depends. Sometimes it’s easy; sometimes it goes as far as criminal liability. You can be a suspect and even the culprit. On average, you just lose money.
FL: Are there alternatives to bans in the fight against illegal operations?
D. M.: Yes, they’re more complex, and officials aren’t used to such solutions. One way is to legalise exchangers, impose tough requirements on them, create conditions for people to move there, and P2P will die on its own.
You can introduce liability for this activity without capping the number of cards. If it’s more convenient to use some legal platform, cheaper and less hassle, I’d rather file and be more transparent for the regulator than risk the “triangle”.
FL: What would crypto exchange look like under the toughest regulation?
D. M.: The worst case is no conditions are created for exchange. P2P is strangled outright, and fiat exchangers are picked off too. As a result, working with the ruble is heavily constrained—or can only be done via exchangers attached to miners.
That is, selling mined bitcoin will be allowed within Russia and only to a handful of specially authorised organisations, where the UX/UI is poor, the rate is bad, and everything resembles Belarus—only worse. I wouldn’t want that; I really don’t like it.
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