Bitcoin

Russia Set to Legalize Bitcoin by 2018, Track Every Transaction

Allen Scott · @bitcoinister | Apr 11, 2017 | 04:00

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The Finance Minister of Russia has revealed state interest in tracking every cryptocurrency transaction ‘just like with bank operations.’ Furthermore, a Bitcoin regulation bill is expected later this year, which could go into effect as early as 2018.

‘The State Needs to Know’

Russian authorities are looking into the possibility of legalizing operations with bitcoin and other cryptocurrencies within the framework of curbing illegal money transfers, Russia’s Finance Minister, Alexey Moiseev told Bloomberg.

He continued:

The state needs to know who the participants are in a financial operation. If there’s a transaction, the people who facilitate it should understand from whom they bought and to whom they were selling, just like with bank operations.

Back in February, Russia’s Central Bank deputy chairwoman, Olga Skorobogatova, revealed that the Bank and MinFin is expected to release a cryptocurrency regulation draft later this year, in which it will define whether Bitcoin is an asset, cash or security.

She also noted that there is no pressing need to impose any restrictions since operations with cryptocurrencies, including Bitcoin, are still insignificant in volume.

Bitcoin is a private currency, and it’s become clear that all is not as simple and straightforward as in books and magazines. The position of regulators and agencies is thus that we would not like to issue a concrete ban on it, but rather understand how to approach it, and from this develop a base for regulation.

Kaliningrad May Be Bitcoin Testbed

Back in February, Bitcoinist reported that the Russian enclave of Kaliningrad has expressed willingness to become the first region where cryptocurrency regulation could be tested.

Kaliningrad’s business ombudsman Boris Titov explained that regardless of what is decided about crypto at the state level, the area could become a testbed where Bitcoin and its ilk are regulated while confirming that cryptocurrencies are currently “not prohibited in the Russian Federation.”

He also added that Kaliningrad could host Russia’s first cryptocurrency exchange.

It’s very important that cryptocurrency circulation not be regulated by any form of sanctions. This concept may sound utopian, but new times call for new solutions, and Kaliningrad Oblast can build on that.

In the Russian mainland, the city of St. Petersburg has recently become a testbed of its own for cryptocurrency teller machines or BTMs. The city currently hosts three machines, which have thus far remained untouched by authorities. If successful, more Bitcoin ATMs and cryptocurrency businesses could follow suit.

Privacy Out the Window?

While the legalization of cryptocurrencies in Russia may seem like a one-eighty degree turn from previous legislative proposals of an outright ban, the status quo is probably better for individuals who value privacy. 

Just like in China, which has recently clamped down on its exchanges, who must now identify all users in accordance with Anti-Money Laundering (AML) laws, Russia seems to be headed in the same direction. 

It also appears that Russia’s Central Bank and the Ministry of Finance have realized that Bitcoin’s public ledger can be used to track every (pseudonymous) transaction on its blockchain.

Thus, it’s probably safe to assume that the expected bill will focus on the implementation of Know-Your-Customer (KYC) and AML policies in an effort to link users’ real identities to their Bitcoin addresses. This identification process will likely occur at the on-ramp, i.e. when buying/converting into Bitcoin, for example.

Therefore, it’s probable that cryptocurrency businesses such as Bitcoin exchanges, Bitcoin ATMs, online conversion services (e.g. Shapeshift) etc. will have to either comply or face penalties.

On the flip-side, regulatory clarity could open the door to more crypto-related startups in Russia. Meanwhile, ‘legal bitcoin’ in the country could also boost demand for more privacy-focused cryptocurrencies like Monero and ZCash as well as the development of Bitcoin anonymizing tools such as Mimble Wimble.

Will Russia legalize crypto in 2018? Will it have a positive effect on Bitcoin? Let us know below!

 Images courtesy of CNBC, Shutterstock