Authorities in Russia are discussing two very different approaches to the regulation of cryptocurrencies and related activities. While the Bank of Russia is reportedly seeking to introduce a ban on buying crypto assets, lawmakers are moving forward with efforts to adopt rules for mining, exchange, and taxation that would effectively legalize cryptocurrencies.
Russian Officials Debate Over Alternative Crypto Regulations
Russian institutions, including the central bank and the lower house of parliament, the State Duma, are mulling over how to put the country’s growing crypto space in order. The head of the Duma’s Financial Market Committee, Anatoly Aksakov, revealed that officials are now discussing “two diametrically opposite approaches” to the regulation of cryptocurrencies — a complete ban or alternatively, legalization of crypto trading.
Quoted by the Interfax news agency, the high-ranking lawmaker elaborated that talks are focused on how to legally define the new financial instruments and how to tax them. They should be finalized during the spring session of the Russian parliament so that Russia has clear regulations in place for the 2023 tax year. Aksakov pointed out that the State Duma has already adopted on first reading a draft law on the taxation of cryptocurrencies.
The new bill, which recognizes digital currencies such as bitcoin as property for tax purposes, was submitted to the house a full year ago. Deputies gave their initial approval for the draft in January 2021, when the law “On Digital Financial Assets” went into force. Commenting on the matter, the chairman of the Duma Committee on Legislation, Pavel Krasheninnikov, emphasized that before taxing cryptocurrency, Russia needs to legalize it.
Anatoly Aksakov further explained that some regulatory proposals are very tough and envisage the full prohibition of the acquisition and ownership of cryptocurrencies. Another approach is to authorize the establishment of cryptocurrency exchanges and ensure their operations are transparent for regulatory bodies which will also make it easier for the Federal Tax Service to tax their transactions.
Another area that deserves attention is cryptocurrency mining, which has been expanding as an industry in the energy-rich Russian Federation. Aksakov has been a supporter of the idea of registering mining as a business activity and taxing it accordingly. Such a move would also allow Russia to introduce higher electricity rates for mining enterprises which now often use subsidized energy at household prices.
Bank of Russia Wants to Prohibit Cryptocurrency Investments
Meanwhile, a media report has revealed that the Central Bank of Russia (CBR) will be seeking to impose a ban on cryptocurrency investments, citing risks they may pose to the country’s financial stability. It says these risks are increasing with the spread of crypto transactions. The regulator has been a strong opponent of the legalization of cryptocurrency circulation in the Russian economy, often referring to assets like bitcoin as “money surrogates,” as well as to their adoption as a means of payment.
According to two sources from the Russian financial sector quoted by Reuters, the monetary authority is now discussing a possible ban on new purchases of crypto assets with market participants and experts. If adopted, the restrictive measure would not affect previous acquisitions, noted one of them, speaking on condition of anonymity. The other source, close to the CBR, unveiled that the central bank’s current position is one of “complete rejection” of all cryptocurrencies.
Asked for a comment, Bank of Russia stated that it’s now preparing an advisory report to present its position on the matter but declined to elaborate in detail. According to Russian media, a working group on cryptocurrency regulation formed at the State Duma will begin to meet in December, starting with a review of a report prepared by the CBR.
In the recently published Financial Stability Overview for the second and third quarter of 2021, Bank of Russia quoted estimates by financial institutions, according to which the annual volume of digital currency transactions made by Russian residents amounts to around $5 billion. The authority warned that cryptocurrency operations “carry significant risks for financial stability and investors.”
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