Back in October 2017, Russia moved to ban cryptocurrency trading by blocking access to cryptocurrency exchange websites. The move followed comments by Sergei Shvetsov, Russia’s first Central Bank Deputy Governor terming cryptocurrency exchanges as dubious.
The ban came after China’s assault on Cryptocurrencies. China banned Initial Coin Offers popularly known as ICOs in September 2017. ICOs are fundraising schemes for Cryptocurrencies (similar to IPOs for stocks).
Russia has held a long-standing position of treating non-state money as ”illegal” but was warming up to Cryptocurrencies before the abrupt assault on cryptocurrency exchange websites. The October 2017 actions were influenced by the Finance Ministry’s statement in September 2017 stating Cryptocurrencies would face regulation like securities but exchanges would have to go.
New draft bill
Since October 2017, Russia seems to have softened its stand on Cryptocurrencies A draft bill has been proposed to legalise cryptocurrency trading on approved exchanges. According to the Deputy Finance Minister, Alexei Moiseev, the finance ministry supports the proposed bill.
The Ministry of Finance has developed a list of approved trading platforms following the presentation of the draft bill on 28th December 2017. Russia now wants to support cryptocurrency trading on official exchanges after taking a firm stand against exchanges back in October. According to Moiseev, Russia, through the finance ministry wants to set some limits. Moiseev supports Cryptocurrency trading on official exchanges and states that the new bill is meant to make the cryptocurrency landscape more stable in Russia.
The proposed legislation has been termed refreshing given Russia’s attitude towards crypto regulation which was somewhat foreboding just recently. In August 2017, Moiseev claimed it was impossible to prove that Cryptocurrencies weren’t pyramid schemes and the Russian government was going to do whatever was necessary to allow qualified investors only in the crypto space.
Background of the draft bill
The current draft bill was initially conceptualized in April 2017 when the Russian government originally decided that it was important to regulate cryptocurrency by law. The first draft was to be reviewed in six months. According to Elina Sidorenko, Moscow State of IR (International Relations) professor who was among the group responsible for drafting the new cryptocurrency regulation, the bill was delayed for several reasons the most notable being conflicting ideas on the purpose/s the new laws should serve.
According to lawmakers like Anatoly Aksakov, the proposed bill could have been signed before January 2018. However, there was yet another delay. The Kremlin published five official orders regulating some aspects of cryptocurrency in October 2017. Lawmakers finally met on 28th December to discuss the draft bill. According to the latest media reports from TASS and RIA, Aksakov claims the latest draft on allowing crypto trading on approved exchanges will most likely be signed into law before March 2018.
Aksakov supports the slow action of the Russian government claiming it is better for the government to act slowly than hastily. Aksakov claims that the government must consider the people who buy Cryptocurrencies and end up being deceived. Such people must be given a chance to trade cryptocurrency legally with all the government protection possible.
On 11th January 2018, Russian President Vladimir Putin went on record stating that the Russian government must be responsible for any difficulty the Russian people get into if the proposed cryptocurrency regulation isn’t enough. This statement alluded to the fact that Putin supports a ”slow but sure process”. It, therefore, won’t be a surprise if the current bill takes longer than expected to become law.
Although Russia’s change of heart on Cryptocurrencies has been welcomed by many, some skeptics claim the government wants to centralize Cryptocurrencies by imposing certain exchanges on the public. This in itself defies the whole idea behind Cryptocurrencies. The main reason why people choose Cryptocurrencies over state-issued currency (FIAT currency) is simple; a single entity can’t manipulate cryptocurrencies.
Cryptocurrencies also offer unmatched anonymity allowing holders to transact undetected. This has obvious tax benefits. Many argue that trading on government-approved exchanges will eliminate anonymity benefits and expose crypto users in Russia to the problems that have been affecting government-issued currency for decades. Furthermore, there is no clear framework on how exchanges will be approved i.e., regulatory requirements and if those regulations will be fair.
Those supporting government intervention claim it will reduce instances of rogue exchanges out to steal virtual currency, but it is impossible to ignore the centralisation issue.