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(Kitco News) - Russia’s Ministry of Finance is reportedly looking to ban the circulation of crypto in the country as part of its efforts to decrease the size of the “shadow economy” in Russia.
According to a report from Frank Media, sources “familiar with the matter” said the Ministry of Finance has proposed a ban on the circulation of cryptocurrency in the country but has carved out exceptions for stablecoins and the sale of cryptocurrencies by miners.
The Ministry has already prepared amendments to its current law and the crypto-mining legalization bill that establish the exemption for crypto miners and stablecoins, sources told Interfax.
Currently, Russians are allowed to purchase, sell, circulate, and issue cryptocurrencies throughout the country. The ban that exists only relates to the use of cryptocurrencies as a means of payment for tax residents, as well as the advertising of payments using crypto.
The Ministry of Finance wants to introduce provisions into the current law and the crypto-mining legalization bill that would make it “prohibited to organize the circulation of digital currency, with the exception of organizing the circulation of digital currency in terms of mining, including participation in a mining pool.”
Russia has an advanced cryptocurrency mining industry due to the country’s vast energy resources and cold winter climate, but mining is not currently recognized as a legal form of business, which means it cannot be taxed.
Firms that would be most affected by the proposed changes are cryptocurrency exchanges and crypto ATMs, as they help facilitate the majority of crypto transactions that occur between Russian businesses and individuals.
Several law enforcement agencies have pushed back against the new proposal due to concerns that the wording is too broad and will lead to a ban on organizing the circulation of digital currency as a whole.
The Federal Security Service (FSB) said that the definition of the organization of the circulation of digital currency should “exhaustively reveal all the features of this process,” while the Investigative Committee (SK) warned that the prohibition of cryptocurrency could lead to an increase in the shadow economy, provoke an increase in crime and fraud, and destabilize economic relations.
Russia introduced its crypto-mining legalization bill in mid-November in an effort to address the loophole that miners find themselves in when it comes to taxes. According to the text of the bill, cryptocurrencies may not be produced for settlement within Russia and are to be sold without the use of Russian infrastructure. The Bank of Russia modified the law to specify that the digital currency produced through mining should only be sold on foreign exchanges and only to non-residents.
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While the Russian government has been hard-nosed about crypto payments within the country, it has actively encouraged the use of cryptocurrencies for cross-border transactions as a way to help skirt the Western sanctions put in place after the start of the Ukraine conflict.
In June, Russian megabank Rosbank announced the launch of a pilot program for cross-border payments using cryptocurrency, becoming the first systemically important Russian bank to launch such a service in the country.
Despite these efforts by the government to limit crypto accessibility, the asset class remains popular with the Russian citizenry as it allows them to have more control over their money amid the country’s economic challenges. During the recent Wagner Group coup attempt, the daily trading volume of USDT/RUB currency pairs spiked from an average of less than $2 billion to $8.53 billion, and the trading activity for BTC/RUB pairs spiked several days prior to the coup attempt, and remained elevated for several days afterward.
