The Russian authorities have not been honest about crypto currencies. Global regulators are already embarrassed by this new global industry with thousands of investors, developers and start-ups.
But the share of Russians in this area is one of the largest. In 2018, 12% of the population stated that they own crypto currencies, at the same time that in the US the percentage reached 7%.
The Russian regulators are much less enthusiastic about this type of investment by the citizens of the vast country. Sergei Svetsov, Russia’s deputy central bank governor, has recently accused crypto currencies, including Bitcoin, of being a kind of pyramid scheme.
President Vladimir Putin has also said that crypto currencies are being used by criminals for money laundering and drug trafficking. In late 2020, the Russian Ministry of Finance stepped up regulatory pressure in the field of encryption.
Any Russian who does not declare his profits from crypto currencies will be punished with a prison sentence, and this measure has already caused a 37% reduction in interest in digital currencies.
Large fines were imposed if someone does not declare them. The largest is equal to 1 million rubles ($13,500) while the prison sentence is imposed when there is concealment of crypto currencies worth at least 40 million rubles ($54,000).
Russia, however, has also shown interest in legalising the purchase and sale of crypto currencies in official exchanges through a series of legislative initiatives from 2018 onwards.
At that time, the Ministry of Finance published a draft law on encryption and also set a framework for the “extraction” of digital effort and transactions.
In July 2020, Vladimir Putin signed the bill on digital financial assets and the law was to come into force a few days ago. The law recognises Bitcoin and some other crypto currencies, but prohibits their use within the country to make payments for goods and services.
In addition to taxation, companies and organisations involved in encryption operating in the country must declare their assets to Rosfin monitoring, Russia’s Federal Financial Monitoring Service.
Declarations should include the total amount of crypto currency transactions, transactions and balances in digital wallets. Although the licensing obligation itself is not strange, the process involves a lot of classic Russian bureaucracy that discourages those interested.
In fact, Russia is among the top 5 countries with the worst conditions for developing a digital currency business.
Politically now the Russian Duma is negative about any kind of encryption. The ruble is paramount, although the government background, the country does not abandon the idea of digital money.
The Central Bank of Russia is organising for the issuance of a digital currency called “digital ruble”, which can be easily monitored and regulated by the central services and will belong to the category of stablecoins that depend on the prices of traditional currencies. The Russian digital ruble will probably be released in 2021 so that Russia can “embrace” this huge market that until now was at war with.