- Russia is drafting a plan to treat cryptocurrencies like regular currencies rather than as a separate entity
- The news is an abrupt change from the central bank’s call for a total ban two weeks ago
- The country is not adopting cryptocurrencies in the same way as El Salvador did with Bitcoin
Russia is drawing up plans to make cryptocurrencies “as an analogue of currencies” just two weeks after the country’s central bank proposed outlawing it. The stunning turnaround highlights the power of the Ministry of Finance who appealed for effective regulation of cryptocurrencies rather than a ban, with legislation due to be drawn up within a week. The news has been taken by some to mean that Russia is adopting cryptocurrencies as legal tender but this is not the case.
From Total Ban to Legal Acceptance
The Central Bank of Russia made headlines two weeks ago when it argued for banning cryptocurrency usage and mining, citing threats to financial stability, citizens’ wellbeing and its monetary policy sovereignty. In response, the Ministry of Finance said that a ban would be ineffective and hard to enforce, suggesting that cryptocurrencies should instead be reclassified and treated as a legitimate investment.
The result has been an agreement between the government and the central bank to come up with draft legislation before February 18 which would see cryptocurrencies treated the same way as currencies rather than digital financial assets. There will, of course, be important rules with regard to cryptocurrency usage:
Their circulation in the legal sector will be possible only with full identification, through the banking system or licensed intermediaries. Operations equivalent to more than 600 thousand rubles must be declared, transactions outside the legal sector for such amounts will become a criminal offense and an aggravating circumstance under the Criminal Code…fines will be introduced for the illegal acceptance of cryptocurrencies as a means of payment.
Regulation of Cryptocurrencies Doesn’t Mean Adoption
It’s important to note that this isn’t a case of Russia adopting cryptocurrency in the same way that El Salvador has with Bitcoin; it is merely a way of regulating its use, with the report noting that “a complete ban on the segment of operations related to their circulation is impossible.”
Nevertheless it does represent progress and allows for cryptocurrency usage and trading to carve out a place among the Russian public rather than it being treated as a criminal enterprise. The speed with which the agreement has been reached has taken the crypto community, and the wider world, by surprise, especially given the glee with which the proposed ban was met by mainstream media outlets last month.
