December 2, 2023

What will cryptocurrency regulation be like in Russia?

What will cryptocurrency regulation be like in Russia?

In early August, Prime Minister Medvedev instructed legislators to deal with the long-suffering law oncryptocurrencies until November 1st. The adoption by the Duma of the bill will mean the beginning of regulation and the assignment of “coins” official status. Until the law is passed, there are several probabilities regarding this status. Each of the possible scenarios will in a certain way affect the market, miners, traders, investors and the crypto community as a whole.

In this post I try to understand how it will affecta new bill on the cryptocurrency market and miners of Russia, I will make several forecasts in case of a particular scenario. To do this, I will briefly review the history of the state's attitude to cryptocurrencies in Russia, describe the current situation and analyze the factors that influence decision making.

As a result, I will describe several optionsdevelopment of the situation, which, in my opinion, is most likely. I clarify in advance that the differences in the results of the upcoming bill can be enormous and will depend primarily on what the status of cryptocurrencies will be.

History of the problem and current state of affairs

For those who follow situations, this paragraph,may contain an impressive amount of button accordions. Therefore, they should immediately skip this part of the post. Without fail I recommend reading it to “amateurs of armored vehicles” and to everyone who just wants to refresh in memory everything that happened and is happening with the official status of coins in the Russian Federation.

So, at the dawn of appearance, when they saw the lightthe first blocks of bitcoin, the Russian authorities the question was not interesting. The first signs of curiosity and skepticism appeared closer to 2012. Then the Bank of Russia was born with newsletters, presumably due to authorship personally by Nabiullina. In these documents, digital currencies were compared with money surrogates and showed a negative neglect of coins.

Already at that time a question arose about statuscryptocurrencies in Russia. Most representatives of domestic regulators managed to speak out for a ban on bitcoins and other digital assets. The creation and adoption of a bill on this subject was constantly delayed. When the issue of cryptocurrencies grew to the level of the government and the president in 2017, some uncertainty arose. On the one hand, criticism of crypto assets against the background of planetary hype would look like a retrograde, on the other hand, cryptozyme and other phenomena caused by speculative value were obvious.

Vladimir Putin was very careful in his assessments, withon the one hand, he said that it was important “not to block regulatory barriers,” on the other hand, he recommended that citizens be careful. It is also known that Putin excludes the possibility of the emergence of a national cryptocurrency, despite China's intentions to create a national digital means of settlement. Prime Minister Medvedev slightly “played” a financial forecaster and in January of this year said that it was too early to bury cryptocurrencies, obviously, he was right.

Thus, by now, despitesome progress with the legislative initiative, cryptocurrencies remain unregulated and do not have an official status in Russia. Against this background, the Duma has already failed Putin's order to pass a bill. In the summer, Medvedev puzzled with a similar assignment and new terms for lawmakers. It should be noted that Krylovsky did slightly move.

The fact is that unresolved at the momentis just a question about the status of cryptocurrencies. Moreover, everything except this, according to Anatoly Aksakov, the Duma committee on the Finnish market, already exists in the law, is described in detail and has clear legal definitions. Those. by November, lawmakers need only decide how legal cryptocurrencies will be, and whether they will be legal at all.

On September 3, the telegram channel “Baza” announced thatthat there is no unity in the government of Russia regarding the regulation of cryptocurrencies. So, according to the channel’s information, the Bank of Russia seeks to ban coins, while the FSB of Russia insists on legal status, with strict regulation and control of digital assets. According to Baza, the disagreements between the departments forced the deputy chairman of the government, Maxim Akimov, to contact Vladimir Putin and inform him that: "the lack of a unified position impedes further work on the bill and its adoption."

There are only three logical scenarios for regulating cryptocurrencies in Russia:

  • Full legalization, up to use as legal tender;
  • A complete ban on any operations and mining;
  • Partial legalization under the control of the Bank of Russia.

The scenario of the next legislative drawdown is unlikely. One can see the desire of the authorities to determine the “rules of the game” at the level of legislation.

Further details about each of the options…

Utopia of crypto-legalization

I note right away that with all the sympathies of the geek andMedvedev's technocrat towards cryptocurrencies, and such a scenario is unlikely. Putin demonstrates a clear sympathy for the positions of Nabiullina, and, accordingly, his decisive influence on the Duma will be closer to a partial or complete ban. The Duma majority, especially in specialized committees, are also difficult to call crypto-optimists. It is important to understand that any regulatory authorities, especially domestic ones, will never give up control. And if necessary, they will definitely seek to control something in case of legalization: “anyhow it didn’t work out”.

There are several reasons that are hypotheticallymay lead to a decision on full legalization, but without the possibility of using it as a means of payment. This is the so-called "Belarusian scenario." Such factors include the trade war between the United States and China (another aggravation at the end of August), the recognition of the coin by the federal authorities of the United States, and, as a result, the instant growth of capitalization of the main cryptocurrencies.

Result of this hypothetically probableThe scenario will be the development of mining, investing and trading. The emergence of new exchanges, the rapid growth of hotel mining in regions with low electricity costs. And as a result, the appearance in these systemically important regions of the so-called cryptodolin, as in the project that Sergey Arestov from BitCluster proposed. The experience of the company is interesting in that in Bratsk, where the company's infrastructure base is located and one of the largest mining hotels in Russia, the industrial mining development project is actively supported at the city administration level. The mayor of Bratsk openly declared support for the company's initiatives, in particular, the official noted

«This is a completely new part of the economy and trade of Bratsk, and for us this project is interesting in all respects».

But while such symbiotic relations between crypto-entrepreneurs and government representatives (even municipal) are rare. More often government bodies take a position of careful non-interference.

The most significant disadvantages that will bethe constraining factors of the scenario (even in the “Belarusian version”) are the inability to control transactions, which, according to regulators, opens up scope for the shadow economy. It is precisely on the connection between crime and cryptocurrencies that legislators base populist statements. The truth is strange, why then they do not want to ban cash fiat in Russia, because it is used at least in the shadow economy.

Complete ban on working with open blockchain

Unlike the first option, this scenariosignificantly more likely. I think it is unnecessary to relay all statements with a negative assessment of cryptocurrencies made by government officials and directly by regulators. It’s easier to count the positive. With the development of this scenario, it is difficult to assume any changes that are useful for the economy and country.

The main motivational argument for the banis a shadow economy. The problem is that bans will not affect her in any way. With the same success, the Internet can be banned - just as absurd. Let drug dealers, pornographers, corrupt officials, scammers and other villains be a little more difficult to cash out or spend crypto, but this will not significantly affect either their number or the way they earn money. Even with the ban on the Internet, they will calmly return to cash, no less anonymous.

At the same time, law-abiding participants will suffermarket. Miners, traders, crypto entrepreneurs, investors. They will be forced to move their business to more loyal countries with low electricity costs. The cryptocurrency market is quickly criminalized, it will end with another witch hunt, as was the case with currency in the USSR.

A relative plus can be considered thatit will be possible to avoid the massive buying up of coins by people who do not understand how to engage in trading and investing. Such people often lose everything, after which associations arise about MMM and tulip bulbs.

However - this will close the legal market not onlyfor the poor at risk, but generally for everyone. The ban also buries infrastructure projects and, naturally, any investment in them. Moreover, any inactive unprofitable enterprise with well-preserved cable management is a potential base for a mining hotel, an industrial mining zone.

Thus, when delegating cryptocurrencies, Russia will receive:

  • loss of efficient use of space in unprofitable enterprises;
  • loss of taxes from the legal sale of ASIC miners;
  • loss of taxes from the sale of electricity;
  • criminalization and marginalization of the legal coin market, which is now relatively transparent and quite ready for regulation;
  • a dubious victory over a non-existent adversary.

Supervised Permit

This scenario involves matchingprohibitive and permissive measures, as well as control by the regulator. For example, the Bank of Russia. The main problem here is that so far no model of interaction between regulators and crypto-communities has been presented to the public. The control mechanism is also not clear. Despite the relative convenience of such a scenario for both the state and the crypto community, its practical implementation has not been worked out.

Obviously, for such a scenario there will beAn intermediary is needed, in the form of an exchange controlled by the Bank of Russia or a service, or directly through the Bank of Russia itself. Thus, the regulator will be able to carry out its intermediary functions, and crypto entrepreneurs will be able to carry out activities within the legal framework.

Today, many indirect factors indicatethat this particular scenario is being prepared. Thus, in an interview with The blockchain journal, the head of the State Duma working group on assessing the risks of cryptocurrency turnover, Elina Sidorenko, shared information that when developing the bill, the world experience in regulating crypto assets was taken into account.

An indirect factor indicating permission within the state. regulation is that the control over the creation of the bill is carried out not by conservative Putin, but by geek Medvedev.

Bright prospects and possible failures

Pretty obvious is that the regulatorsand the state as a whole is more advantageous than the last option. This will open up opportunities for investment, and will allow you to receive funds from taxes. The Bank of Russia will gain ample opportunity to control the cryptocurrency market and crypto emission.

It’s important to understand that under the Russianspecifics, everything can turn out to be “smooth” only “on paper”. Given that the technical implementation of control is fraught with “the development of hemorrhoids” among officials of the Bank of Russia and the Ministry of Finance.