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Less than three months left before the adoption of the law on cryptocurrency in Russia

The continuing stand-off between the Federal Service for Supervision of Communications, Information Technology and Mass Media (Roscomnadzor) and Telegram increasingly draws media attention. It has already had negative repercussions on a considerable number of services with no relation to Telegram at all. So what about another, still controversial, issue of the Russian agenda, namely, cryptocurrency regulation?

Let us recall that back in October 2017 Vladimir Putin approved the list of orders to the Government and the Bank of Russia under the “Digital Economy of the Russian Federation” programme. The officials from the Government and major Russian financial regulator must elaborate legislative amendments so that the notions of “digital currency”, “digital mortgage”, “token”, “smart contract” and the like could be defined by Russian law: all this given the fact that ruble is to retain its status of the only legal tender in Russia. It is also necessary to bring some clarity to the set of requirements applicable to the organizations involved in dealing with cryptographic means within the distributed ledger (“mining”), in particular, concerning their registration and taxation. Yet another point of great importance is that ICO (Initial Coin Offering) regulation norms must be settled before July 1.

The closer the deadline set by the President, the more frequently the news related to cryptocurrency in Russia pop up in the media space. One of these highlighted the emergence of “Sbercoin” cryptocurrency exchange bureau near the Kursky railway station in Moscow that provides services for purchasing or selling cryptocurrency to anyone who needs them. It is important to note that this exchange point has no relation to Sberbank at all. It seems like this was the reason why the Muscowites addressed the parliamentarian Dmitry Ionin with a request to verify the legality of the bureau’s activity the very next day after this story had appeared in the media.

A few days later, the Director of Financial Monitoring and Currency Control Department at the Bank of Russia Yuri Polupanov stated that there are at least three shopping malls in Moscow which host the illegal cryptocurrency circulation. The wholesale markets mentioned in this context were “Moskva”, “Food City”and “Sadovod”, each of them housing unregistered cryptocurrency exchange points.

“We see unaccounted cryptocurrency earnings here that are being instantly transferred to their owners’homelands and converted to local national fiat currencies there,”- the official noted.

However, the number of crypto-exchange bureaus and terminals operating in Russia voiced by Polupanov turned out to be a great underestimation. The real figures were revealed with the help of Bitmap application. As estimated by its users, there are, in fact, no less than 69 active cryptocurrency exchange points in Russia, the lion’s share of those (more exactly, 16 cryptocurrency exchange bureaus and bitcoin ATMs) being concentrated in Moscow.

Despite the fact that many people are quite skeptical about cryptocurrencies and sometimes even compare them to financial pyramids, there are those who regard them as an excellent opportunity to get rid of EU and US sanctions. For example, the Deputy Chairman of the Concil of Ministers of the Republic of Crimea Georgy Muradov proposed to reduce the vulnerability of Crimean economy to the sanctions imposed by EU through the use of cryptocurrencies. He explained that the emergence of a crypto-currency investment fund in Crimea will make it possible to accumulate cryptocurrency resources that could be then transferred to fiat money and used to create investment projects.

It should be noted as well that Venezuela was the first country to launch its own cryptocurrency to circumvent the US sanctions. El Petro, the Venezuelan national cryptocurrency that is backed by the country’s oil deposits, undergoes gradual introduction to the national economy and even is purchasable for rubles by now. This caused negative reaction on the part of the US Government that forbade US residents from any transactions involving petro.

It is worthwhile to note in conclusion that approaches to cryptocurrency regulation vary from country to country. Some take steps towards adopting their legislative framework to cryptocurrency market realities. Elsewhere, namely, in Europe and US, there is a tendency for regulating certain aspects of cryptocurrencies, while the question of exact definitions is being set aside. At the same time, Japan sets cryptocurrencies loose for free circulation, in fact, declaring them a full-blooded legal tender. Only time will tell, which way is Russia to choose.