Casey Wagner

<div id="highlights-block_6213cb3ddc828" class="highlights">
 <ul>
 <li>The Russian Ministry of Finance has revealed details of proposed cryptocurrency law</li>
 <li>The announcement comes as tensions between Russia and Ukraine mount</li>
 </ul>
 
</div>



Cryptocurrencies should be not be given legal currency status and treated only as an investment vehicle, the Russian finance ministry <a href="https://minfin.gov.ru/ru/press-center/?id_4=37774-minfin_rossii_napravil_v_pravitelstvo_rossii_proekt_federalnogo_zakona_o_tsifrovoi_valyute" target="_blank" rel="noreferrer noopener">said</a> Monday.



The recommendation forms part of a draft cryptocurrency law the ministry presented to the Russian Parliament Feb. 18. The finance ministry&#8217;s proposal reinforces Russia&#8217;s current policy of not allowing cryptocurrencies to be used as a form of payment. 



The bill focuses on defining regulatory requirements around exchanges. It also proposes that citizens looking to purchase and hold digital assets complete a screening process that would assess knowledge of the technology and associated investment risks.



The announcement mentions the ongoing <a href="https://cms.blockworks.co/as-russia-tests-digital-ruble-plans-for-broader-crypto-regulation-are-uncertain/" target="_blank" rel="noreferrer noopener">controversy</a> around cryptocurrencies in the country. The Bank of Russia — the country’s central bank — had proposed that all cryptocurrency mining, issuance and circulation should be banned in the country, the Ministry of Finance said.



“The proposals received from the Bank of Russia will be taken into account in further work on the draft law in so far as it does not contradict the approaches of the Russian Ministry of Finance,” the Ministry said in the release, which has been translated into English.&nbsp;



The move comes as growing concerns over conflict between Russia and Ukraine have put pressure on risk assets. Bitcoin and ether are down about 11% and 5% over the past week as fears over a war in Eastern Europe mount.



Analysts are confident though that the market can withstand the geopolitical forces at play as long as things do not escalate. It is a similar situation to the 2014 Russian invasion of the Crimean Peninsula, once part of the Ukraine, Tom Essaye, founder of Sevens Report Research, wrote in a recent note.



“Analysts believe that Russia may be setting up a precedent to invade Donbas [in eastern Ukraine] and annex part of the territory,” Essaye said. “Would that be a materially bearish event? No, not unless it created an all-out war between Ukraine and Russia (which is still unlikely).”



The announcement from the Ministry of Finance did not mention how the current situation in Russia — which is facing an increasingly harsh battery of economic sanctions from Western nations attempting to dissuade Putin from invading Russia — may impact the future of the crypto bill.



Some have suggested Russia will <a href="https://cms.blockworks.co/as-russia-tests-digital-ruble-plans-for-broader-crypto-regulation-are-uncertain/" target="_blank" rel="noreferrer noopener">accelerate its development</a> of a digital currency to help it mitigate the sanctions’ impact.



A full text of the bill has not yet been made public.



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Russian Finance Ministry Says Crypto Shouldn’t Be Legal Currency

Ben Strack

<div id="highlights-block_6210035252a70" class="highlights">
 <ul>
 <li>Russia’s Ministry of Finance has reportedly begun accepting public comments on rules around digital asset transactions</li>
 <li>The Bank of Russia completed the prototype of its digital ruble platform in December, and 12 banks agreed to test the platform</li>
 </ul>
 
</div>



As Russia mulls rolling out a state-sponsored digital ruble, crypto regulations more broadly remain up in the air amid clashes between the country’s central bank and finance ministry.&nbsp;



A crypto bill appears to still be in the works, and Russia’s Ministry of Finance has <a href="https://regulation.gov.ru/projects#npa=125083" target="_blank" rel="noreferrer noopener">signaled</a> that it is seeking public comments until March 18 on rules around digital asset transactions.&nbsp;



Nick du Cros, head of compliance and regulatory affairs at digital asset manager CoinShares, called the potential of a bill this year “a significant positive development.”



“The central bank doesn&#8217;t hold the pen on the draft legislation, so it will need to lobby very hard for the legislation to reflect its point of view,” du Cros told Blockworks. “As it looks now, the central bank&#8217;s view that there should be an outright ban on crypto and crypto mining looks less likely than Russian-centric regulation which allows crypto to exist with the current banking network.”



Russian Finance Minister Anton Siluanov said Friday that he hopes such a bill passes before the end of the year, <a href="https://www.reuters.com/article/idUSR4N2UR004" target="_blank" rel="noreferrer noopener">according to Reuters</a>.



The Russian government and central bank last week <a href="https://cms.blockworks.co/russias-move-to-regulate-cryptocurrency-puts-other-countries-on-notice/" target="_blank" rel="noreferrer noopener">reached an agreement</a> to draft legislation or amend existing laws recognizing crypto as currency. News outlet <a href="https://www.kommersant.ru/doc/5206307" target="_blank" rel="noreferrer noopener">Kommersant reported</a> that legislation would be drawn up by Feb. 18.



Bloomberg News <a href="https://www.bloomberg.com/news/articles/2022-02-15/nabiullina-digs-heels-in-over-russian-plan-to-legalize-crypto" target="_blank" rel="noreferrer noopener">reported</a> that government officials at the Bank of Russia and the Ministry of Finance did not reach an agreement on the best path forward on Tuesday.&nbsp;



The central bank had previously <a href="https://cms.blockworks.co/proposed-russian-crypto-ban-may-push-miners-west/" target="_blank" rel="noreferrer noopener">proposed to restrict miners</a> and crypto trading over concerns that they could endanger the country’s financial system. President Vladimir Putin has said he supports a plan to tax and regulate the space.



The Bank of Russia, meanwhile, launched a prototype of its digital ruble platform in December, with 12 banks agreeing to test it. Three banks have connected to the platform, the bank said Tuesday, with two completing digital ruble transactions between clients via mobile applications.



Focusing first on the digital ruble before opening up the system to other currencies could give the country a leg-up in the market, Stan Miroshnik, partner at growth equity fund 10T, told Blockworks.



Noting a parallel to China’s <a href="https://cms.blockworks.co/china-debuts-digital-yuan-at-winter-olympics-amid-warnings-from-us-senator/" target="_blank" rel="noreferrer noopener">digital yuan</a>, Miroshnik said the state-sponsored cryptocurrency helped phase out other speculative digital assets.



“To the extent you want to create your own dominant digital asset that the central bank has control of…I think that’s the playbook,” Miroshnik said. “I think that’s the tension we’re seeing playing out.”



The latest draft legislation has been published while the G-20 Finance Ministers and Central Bank Governor Meeting takes place, du Cros said, adding that the timing indicates Russia is more interested in “bespoke” regulations over international crypto standards.



The Bank of Russia and Ministry of Finance did not immediately return a request for comment.



<a href="https://cms.blockworks.co/ukraine-passes-law-legalizing-crypto-as-threat-of-war-looms/">Ukraine passed amendments to its law</a> on digital assets to ratify the eventual creation of a legal market for cryptocurrencies as the threat of an invasion by Russia looms.



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Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



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