- Russian cryptocurrency users are no longer be able to deposit into their wallets anonymously
- Bank accounts must be tied to all crypto wallet onramps
- Privacy advocates are worried that it could lead to abuse by authorities in the future
Russia has banned citizens from depositing anonymously into cryptocurrency wallets in a crackdown that will concern privacy advocates. The new law, which came into effect this week, prevents Russian cryptocurrency holders from topping up their wallets with cash payments or anonymously through money services. Despite suggestions that 10 million crypto people could be affected, experts think that the damage could be long term rather than immediate.
Russian Cryptocurrency Wallets Must be Tied to Bank Accounts
The ban on the anonymous topping up of crypto wallets is part of a push by Russian authorities to gain more control over electronic payments, with anonymous topping up of some travel cards in Moscow also banned. From now on, anyone wanting to purchase cryptocurrency or top up selected travel cards must have their card linked to their bank account.
The initiative was instigated by Rosfinmonitoring, Russia’s Federal Financial Monitoring Service, in early 2019 citing concerns that some Russian cryptocurrency users were using it for illegal activities such as the financing of terrorism and drug trafficking. Linking to a bank account would naturally immediately identify individuals. The amendments to the law were adopted in the summer of 2019, but participants were given 12 months to adapt their business processes to the amendment.
A Slippery Slope?
Despite some 10 million Russian cryptocurrency users being affected, experts believe the ramifications of the order will be felt down the road rather than immediately. Most Russian cryptocurrency holders use exchanges or other entry points where their identity is already verified, meaning that the rule change will make no difference to them.
However, the bigger concern is that this rule change represents the start of a slippery slope that could give the authorities more and more license to investigate and record individuals’ cryptocurrency holdings, which is the antithesis of the ideology behind the likes of Bitcoin. Privacy advocates will be concerned that intrusion such as this could lead to forfeiture or seizure of assets as the state demands.