This day in history: January 27, 2014 – Bank of Russia outlaws Bitcoin

Maria Nikolova

Provision of Bitcoin exchange services is a suspicious activity and is treated as violation of state AML laws, the Bank of Russia stated three years ago.

The evolution of virtual currencies, and Bitcoin, in particular, in Russia has been extensive. Exactly three years ago – on January 27, 2014, the Central Bank of Russia published an announcement entitled “On the use of virtual currencies, and Bitcoin, in particular, when conducting transactions”.

  • The announcement

In the announcement, the Bank of Russia noted the growing popularity of virtual currencies across the globe and warned of high risk of losses associated with operations involving them. The regulator alerted the public against using virtual currencies for exchange purposes.

The regulator referred to Article 27 of the law “On the Central Bank of the Russian Federation”, which prohibits the issue of money surrogates in the Russian Federation.

Finally, the Bank of Russia stated that the provision of virtual currency exchange services by business entities will be considered as involvement in suspicious activities. These actions are treated as violations of the laws on anti-money laundering and terrorism funding.

  • And then MTGOX collapsed

One month after the Russian “Megaregulator” outlawed Bitcoin transactions, MtGox Co., Ltd. submitted an application for the start of a procedure of civil rehabilitation at the Tokyo District Court.

The administrators reported back then that MtGox had liabilities of about JPY 6.5 billion and JPY 3.84 billion in assets. At that point, the administrators found that approximately 750,000 bitcoins deposited by users and approximately 100,000 bitcoins belonging to the exchange had disappeared.

  • The law

In tune with the harsh stance of the Bank of Russia towards Bitcoin and other virtual currencies, Russia’s Ministry of Finance has started work on a legislative piece that would impose severe penalties on individuals and business entities involved in Bitcoin issue and transactions.

In March 2016, the Finance Ministry announced the latest amendments, which envisage a maximum penalty of seven years of imprisonment for Bitcoin-related activities. This penalty will apply to senior managers of banks and financial services providers engaged in activities such as Bitcoin mining, buying/selling, “issuing”. The list of proposed penalties includes a ban from taking certain roles in the financial services sector, along with monetary penalties of up to RUB 2.5 million.

  • The softer stance

In February 2016, the Bank of Russia exhibited the first signs of warming up to novel technologies associated with virtual currencies by announcing the establishment of a group that would analyse the innovations and promising technologies in the financial market. Amid the priority questions for the group are the new developments in the mobile and payment areas, as well as the study of distributed ledger technologies (like blockchain).

Even Russia’s Finance Ministry seems to be slowing down its push for introducing severe punishments for Bitcoin-related activities. Earlier this month, Deputy Finance Minister Alexei Moiseyev said that Russia’s Central Bank and the Federal Financial Monitoring Service did not see any threats from the use of crypto-currencies. At that point, the implementation of the “anti-Bitcoin law” is on hold.

  • BitRuble

Whereas the authorities mull how to regulate the “realm” of virtual currencies, the business has its own view on the matter. In September 2015, Russian media reported of plans by payment services provider Qiwi PLC (NASDAQ:QIWI) to launch its own crypto currency, set to bear the name BitRuble. The new currency was said to be based on the blockchain technology.

All plans to launch the “Russian Bitcoin”, however, will have to be co-ordinated with the Bank of Russia.

Read this next

Retail FX

ThinkMarkets expands CFDs lineup to over 4000 ETFs and shares

ThinkMarkets has expanded its service offering by incorporating 2500 new CFDs on shares and ETFs on its ThinkTrader platform.

Retail FX

France regulator warns investors of Omega Pro,

France’s financial markets regulator alerted investors that scams related to Omega Pro Ltd are beginning to circulate, with the blacklisted firm capitalizing on the situation to run a range of “unrealistic” offers.

Digital Assets

Web3 platform Grand Time paid $2 million in token earnings to date

Community-driven Web3 platform Grand Time said its offering – which includes a multifaceted platforms and its native token – has been gaining significant traction highlighted by impressive operational metrics.

Institutional FX

FX volumes at MOEX halved in April as ruble gains gorund

Currency trading at Moscow Exchange (MOEX) halted its upward route in April as monthly volumes nearly halved from a month earlier.

Digital Assets

FTX US adds stock trading, fractional shares to crypto platform

FTX US, the American subsidiary of crypto exchange FTX has kicked off stock trading feature to its customers in an effort to compete with popular platforms such as Robinhood and eToro.

Industry News

UK FCA empowered to remove brokers’ permissions in 28 days

Businesses with permissions they don’t need or use, risk misleading consumers. These new powers will enable us to take quicker action to cancel permissions that are not used or needed.

Industry News

CFTC charges $44m Ponzi scheme but millions may have fled to foreign crypto exchange

The CFTC alleged that defendants transferred millions of dollars to an off-shore entity that, in turn, may have transferred funds to a foreign cryptocurrency exchange. None of these funds were returned to the pool.


Saxo Bank deploys Adenza to address Basel and EBA requirements

The integration of ControllerView will enhance Basel-driven capital calculations and reporting at Saxo Bank in support of the bank’s multijurisdictional capital and liquidity reporting requirements throughout Denmark, Switzerland and UK, with plans to expand into the Netherlands.

Executive Moves

ComplySci appoints CTO, CPO, and CLO to further regtech’s product expansion

ComplySci offers compliance software used by more than 1400 global institutions to identify risk and address regulatory compliance challenges.