By Swann Collins, investor, writer and consultant in international affairs. Eurasia Business News – February 9, 2022 – Update on April 8, 2022
The Russian government and the Bank of Russia have agreed on a future regime for cryptocurrencies : by February 18, they will present a draft law on the circulation of cryptocurrencies in the Russian economy, reported the national newspaper Kommersant. Cryptocurrencies will be recognized in this draft as an analogue of currencies like dollars, and not as digital financial assets. This should lower the tax burden of owning cryptocurrencies. Their circulation in the Russian economy will be possible only with full identification, through the banking system or licensed intermediaries.
Users will have to declare operations equivalent to more than 600 thousand rubles (7,027 euros). 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. Mining would not be affected by the draft project.
The Russian federal government, after meetings with Deputy Prime Minister, Chief of Staff of the White House Dmitry Grigorenko, published the approved “Concept for regulating the mechanisms for organizing the circulation of digital currencies.”
Russia has been discussing the new status of cryptocurrencies and digital currencies in the country since the summer of 2021. On January 20, 2021 the Bank of Russia released a consultative report proposing to ban the circulation of cryptocurrencies in the Russian Federation. According to the Central Bank, cryptoization leads to “undermining the circulation of money and the loss of the sovereignty of the national currency”, and also results in high investment risks for citizens.
The Russian Ministry of Finance had also released a strategy and a draft regulation for cryptocurrencies, disagreeing with the conclusion of the Russian central bank.
Russia’s financial watchdog, Rosfinmonitoring, the Federal Tax Service, the Ministry of Economic Development, the Ministry of Internal Affairs, the Federal Security Service, and the Prosecutor General’s Office also took part in the discussions.
Legalization of cryptocurrency ownership in Russia under rather strict rules will not make it legal tender, but will allow at least a part of Russian owners of cryptocurrency for 2 trillion rubles to operate in the national economy under the control of the federal state through banks and with the payment of taxes.
The final strategy of the federal government is mainly based on the positions of the Russian Federal Ministry of Finance. Until February 18, the Ministry and the Bank of Russia should formulate either a separate bill or amendments to the law on the Digital Financial Assets, in force since January 2021.
The regulation of turnover will require quick decisions from cryptocurrency owners – whether they should move into the emerging legal market segment, get rid of such assets, or stay in the illegal sector. The main difference between the concept, which, in fact, implements the strong distrust of the Russian central bank towards cryptocurrency, is the proposal to develop amendments to the Criminal Code and the Code of Criminal Procedure, according to which non-compliance of declarations of transactions with cryptocurrency will become a criminal offense, and its use will become an aggravating circumstance in other offenses.
In all other respects, the cryptocurrency in the Russian Federation, in essence, will be recognized as a close analogue of foreign currency (and not a digital financial asset), like the dollar of the euro.
The possession of cryptocurrency in the jurisdiction of the Russian Federation and transactions with it (as well as with the dollar) will be not prohibited – but only if done through the “organizer of the digital currency exchange system” (a Russian bank with a license) or a peer-to-peer exchanger legalized in the Russian Federation. The mode of operation of the legal segment will involve the full identification of the client according to banking rules. The implementation of AML / CFT requirements and all information about transactions through the Transparent Blockchain system of Russian financial monitoring authorities will be available for state control in the same way as transactions with non-cash rubles or foreign currency on bank accounts.
The cryptomarket positively reacted to this news. Bitcoin (BTC) gained 1.18%, reaching $ 44,621 on February 9, 10:39 pm Paris Time. This is a 20% gain in one week. Bitcoin price hit $ 42,702 on January 11.
Ethereum (ETH) rose by 4.44%, to $ 3,253.
Bitcoin had benefited at the end of 2020 and in 2021 from the flow of liquidity that watered the markets due to the very extensive monetary policy of the US Federal Reserve and of the European central bank. But prospect of a US Fed tappering, to counter high inflation, has been weighing on bitcoin, as on the world stock markets.
On April 7, the Russian Ministry of Finance finalized the draft federal law “On Digital Currency”, and sent it to the government of the Russian Federation. Some provisions of the bill have been clarified and specified, including those relating to activities for the implementation of digital mining, announced the Russian Ministry of Finance.
The draft provides for the creation of a comprehensive regulation of the Russian cryptocurrency market, including the procedure for performing operations with digital currencies and their issuance, as well as determining the characteristics of the activities of cryptocurrency market entities.
The Russian central bank has called on a complete ban of cryptocurrencies, considering them as a threat to the Russian financial system. The Russian Ministry of Finance believes that the trade and the use of cryptocurrencies in the national economy should be regulated and taxed, not banned.
A number of Russian banks would have supported the project of the Ministry of Finance and would have confirmed that they are ready to control the turnover of digital currencies.
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© Copyright 2022 – Swann Collins, investor and consultant in international affairs.