Russia’s Central Bank proposes law to ban cryptocurrency investments

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 another source close to the financial regulator 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 this month 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.

Russian Duma to address gaps in crypto regulation

The news comes as a working group formed by the Russian State Duma to tackle the issues of cryptocurrency regulations is set to hold 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.

Volodin pointed out that the working group doesn’t aim to prohibit the cryptocurrency, since “it is a virtual reality”. Instead, it seeks to completely legalize the virtual asset class to be subsequently controlled.

The impetus for the regulation of crypto mining is driven by mounting concerns that Russia has become a major destination for crypto miners after China’s recent crackdown.

Russian President Vladimir Putin said earlier that cryptocurrencies have a “potential future” as a means of payment. The Russian leader pointed out that crypto money finds more real-world use cases. However, Putin was less sure about the fundamentals that were driving the valuations of cryptocurrencies like Bitcoin, which is trading at a price of upwards of $57,000.

To insulate the Russian economy from Western sanctions, the Kremlin has been trying to reduce the dependence on the U.S. dollar in the country’s foreign trade. Despite being a long-term priority, Putin said Russia will be forced to rely on the greenback for some time, adding that he’s not convinced that Bitcoin can replace the buck in settling oil trades.