Recent reports suggest the Russian government and the Bank of Russia have reached an agreement on regulating cryptocurrencies. Initially, Russia's central bank proposed banning cryptocurrencies as well as crypto mining.
Fitch credit rating agency warned in a statement that a complete ban on cryptocurrencies 'also blocks off potential revenue-generating activity, and could set back Russian banksβ engagement with the technologies underlying the cryptocurrency sector. If this slows the spread of crypto-driven innovations that, for example, improve the speed and security of payments or asset liquidity via tokenisation, it could over time weaken this aspect of the Russian banking sectorβs operational environment relative to peers'.
President Putin said that the government will work with the central bank in order to reach an agreement. He added that Russia has competitive advantages in the crypto mining sector (possibly linked to lower electricity consumption costs).
How Will Russia Regulate Cryptocurrencies?
According to the Russian news publisher, Kommersant the draft law will be presented by 18 February 2022. It has been suggested that cryptocurrencies may only be available via the banking system or licensed intermediaries. Full identification may be required.
The highlight of the news is that bitcoin will be recognized as a foreign currency as opposed to a digital asset.
Transactions above 600,000 rubles (approximately $8,000) must be declared. Any transactions that are made outside the legal framework will be considered as a criminal offence. Until 18 February, the Bank of Russia will present its amendments or in a separate bill.
Some of the bitcoin regulations may only be implemented in the second half of 2022 or in 2023.
The Russian Ministry of Finance estimates that Russians hold 12 million crypto wallets that are worth around 2 trillion rubles. These estimates do not factor in the criminal sector.
A Bloomberg report suggests that Russians are holding over 16 trillion rubles of cryptocurrencies. According to the the Bell, the Russian government may collect as much as $13 billion per year for taxing cryptocurrencies. Russia is currently the world's No.3 center for crypto mining .
According to some surveys the majority of crypto holders in Russia are aged between 25 and 44. Bitcoin (BTC) is their preferred choice.
The Digital Ruble Is Being Tested by 12 banks
12 Russian banks are currently testing the Central Bank Digital Currency (CBDC), Russia's first digital ruble. In the first phase, C2C payments are tested by the banks.
Some of the banks that are participating in the pilot are Promsvyazbank, Tinkoff Bank, SberBank and Rosbank. In the next phase, smart contracts will be tested in the Federal Treasury. Other forms of crypto payments will be tested including Business-to-Business (B2B), Business-to-Government (B2G), Consumer-to-Business (Π‘2B) and more.
