On Feb. 18, the Russian Ministry of Finance kicked off public consultations<\/a> on the rules of cryptocurrency issuance and transactions. While a welcome development, it is less than the country\u2019s crypto space had expected to get. Earlier in the week, the government announced that by Feb. 18, a bill containing the finance ministry and central bank\u2019s consolidated position on crypto regulation would be drafted. Updated estimates suggest that it will take at least another month for draft legislation to see the light. The main reason for the delay appears to be the central bank\u2019s renewed resistance, which just several days ago seemed to have been overcome. Here is a roundup of the latest twists in this rocky ride.<\/p>\n On Jan. 20, the Central Bank of Russia (CBR) issued a report summarizing its position on digital assets<\/a>. Using a variety of the usual anti-crypto arguments, such as comparing digital assets to a Ponzi scheme, the regulator called for a complete domestic ban on using traditional financial infrastructure for crypto trading, as well as for curbing crypto mining in the country.<\/p>\n The proposal was a little less scary than it sounds: The CBR didn\u2019t intend to outlaw individual possession of crypto or the use of international platforms for trading. But the measure was clearly aimed at big players \u2014 Russian private banks and institutional investors \u2014 discouraging them from any involvement in digital assets.<\/p>\n Moreover, the report immediately drew harsh criticism from the widest possible range of stakeholders, from local industry players to political activists and influencers such as Telegram\u2019s Pavel Durov. But more importantly, the denunciation from several other important offices of the Russian government immediately followed.<\/p>\n On Jan. 25, Ivan Chebeskov, head of the Finance Ministry\u2019s Department of Financial Policy, stated that the ministry\u2019s position on digital assets is one of regulation, not prohibition<\/a>, and asserted that it had already been working on its own regulatory document.<\/p>\n On Feb. 8, the Russian government approved the \u201cFramework for regulating the mechanisms of digital currencies circulation\u201d \u2014 a document that had been published<\/a> earlier <\/a>by the Finance Ministry. This was an unexpected, yet favorable, turn of events: The document proposes a regulatory regime that would largely view digital assets as regular currencies. It was also implied that the government\u2019s approval meant that the CBR\u2019s concerns were settled<\/a>. Feb. 18 was announced as the date by which the bill, reflecting the two bodies\u2019 reconciled position, would be ready.<\/p>\n The framework opens by brushing off the idea of a blanket ban. According to the ministry, the ban wouldn\u2019t be feasible or practical in a country with more than 12 million crypto wallets \u2014 and more than $26 billion worth of digital assets held in them \u2014 and the world\u2019s third-biggest crypto mining capacity: <\/p>\n \u201cA total lack of regulation, as well as a ban, would lead to the growth of a dark economy, fraud, and the overall destabilization of the sector. […] Proposed legislative changes are aimed at creating a legal market for cryptocurrencies with circulation rules in place and the range of participants defined, along with the requirements that they are subject to.\u201d <\/p>\n The proposed rules define cryptocurrencies as a \u201cclose analog\u201d to foreign currencies, not as a digital financial asset regulated by a separate law. According to the proposal, it would be perfectly legal to own and exchange crypto, but only via licensed banks or peer-to-peer exchanges with a Russian license. Customers would be subject to full identification processes according to bank standards and Anti-Money Laundering and Counter-Terrorist Financing requirements. All operational data should travel via a government-owned \u201ctransparent blockchain\u201d system.<\/p>\n The framework also stipulates that failing to declare crypto transactions above a certain size would be criminal and treats the use of cryptocurrencies as an aggravating factor in certain criminal offenses.<\/p>\n Rejoicing over the two key regulatory players\u2019 compromise, however, might have been premature. On Feb. 15, CBR Governor Elvira Nabiullina doubled down on the regulator\u2019s opposition<\/a> to the proposed legalization of crypto trading. The statement came simultaneously with the report on the progress the CBR had been making on its central bank digital currency.<\/p>\n Nabiullina also sent a letter to Finance Minister Anton Siluanov in which she reiterated her \u201ccrypto is a Ponzi scheme\u201d concerns. She maintained that institutional support of crypto circulation would create \u201can illusion of state protection\u201d among investors, who would seek help from the government should the crypto market collapse. Basically, the letter repeats the arguments and propositions of the CBR\u2019s January report. <\/p>\n At this point, the arrival of a \u201creconciled\u201d regulatory framework by the end of the week clearly came into question.<\/p>\n Olga Goncharova, government relationship director in the CIS at cryptocurrency exchange Binance, said that the company supports the finance ministry\u2019s position, adding that \u201cRegulation will contribute to the \u2018deshadowing\u2019 of the market,\u201d while a complete ban would have the opposite effect.<\/p>\nRound 1: Central bank\u2019s ban proposal <\/h3>\n
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Round 2: Finance Ministry\u2019s proposed framework<\/h3>\n
Round 3: The CBR\u2019s about-face<\/h3>\n
What\u2019s next?<\/h3>\n