Bank of Russia mulls blocking card payments related to cryptocurrency

abdelaziz Fathi

Russia’s Central Bank is mulling new ways to prevent locals from investing in cryptocurrency, including blocking payments to trading and exchange platforms.

Russia

The central bank, which has been an outspoken critic of cryptocurrency for many years, may oblige banks to stop transactions with certain Merchant Category Codes (MCC). The four-digit code allows the card issuer to categorize the transactions consumers complete using a particular card. Crypto exchanges usually use the MCC code 6051, the Russian edition of Forbes magazine reported, citing unnamed sources close to the financial regulator.

The restriction of crypto cards is, however, one of many options on the table for discussion as the central bank is kicking around several options for limiting investments in the digital asset.

“A large number of Russians own the cryptocurrency. At the same time, cryptocurrencies are volatile, unsupported and opaque for regulators. However, now their ban can create problems for millions of compatriots, since it will make illegal what they already own. In this regard, various options for regulation are currently being worked out. It is planned to develop a consolidated position on this issue in 2022,” the press service of the Ministry of Finance commented told Forbes.

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Russian Duma to address gaps in crypto regulation

Russian central bank officials are working on new laws to tame financial stability risks that it sees from an increase in crypto transactions.

The proposed legislation, which yet to be listed for debate in the current parliamentary session, seeks to prohibit all new purchases of crypto assets in Russia. However, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses. If approved, it wouldn’t penalize old purchases of cryptocurrencies.

Reuters quoted sources as saying the central bank’s current position was a “complete rejection” of all cryptocurrencies. Policy makers are already preparing an advisory report to voice its stance on the issue, the report further notes.

Central Bank First Deputy Governor Ksenia Yudaeva said that as cryptocurrencies gain popularity, regulators are increasingly alarmed about the potential risks to financial stability they bring.

“Additional steps are needed to ensure that money surrogates are not used for payments. The situation in developed market countries more and more resembles the so-called shadow financial system,” Yudaeva wrote in an article.

The news comes as a working group formed by the Russian State Duma to tackle the issues of cryptocurrency regulations has held its first meetings.

Duma Speaker Vyacheslav Volodin instructed the legislature to create a group that will see participation from outside the government bodies and the lower house of parliament. The overarching goal of the group seeks to address regulatory gaps in the industry, including the taxation of bitcoin mining, especially by miners who use cheap electricity.

 

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