Russian President Putin approved a change in the law banning the use of bitcoin for payments in Russia. This is another development in Russia’s increasingly complex attitude towards Bitcoin.
The website of the Russian State Duma reads that Putin approved a bill that would suspend certain parts of the law “in connection with banks and banking activities”, making it illegal to pay for goods and services with bitcoin in Russia.
The amendment to the law was made a month ago and has already been approved by Parliament and the Duma.
It seems to address the concerns of the Russian central bank. He is not a fan of Bitcoin and has for some time warned about the risk of money laundering and the possible risks to citizens. The central bank therefore hinted at a total ban, but Putin put a stop to it.
According to Putin, Russia has a “competitive advantage” in bitcoin mining due to the large energy reserves in the country. He therefore pushed for regulation. It seems that they are aiming for a fairly mild regulation for the mining sector, where a simple business registration is sufficient.
It is probably hoped that this will attract more miners to the country to increase the local market for Russian energy producers. It is interesting for Russia because the export of Russian energy has been hampered by sanctions.
The IMF warned in a report that Russia can still convert energy supplies into money in this way. Shortly afterwards, the United States imposed sanctions on a mining company operating in Russia.
There also seems to be a growing interest in Russia to use bitcoin for international payments. Ivan Chebeskov, head of the finance department of the Ministry of Finance, said last month that it is being discussed at a high level.
In the past, the chairman of the Russian Duma’s energy committee has also suggested that countries that are ‘friendly’ to Russia may be allowed to pay for Russian energy with bitcoin.
Even the Russian central bank agreed. Central Bank Deputy Governor Ksenia Yudaeva said the central bank “in principle does not mind the use of cryptocurrencies in international transactions.” However, she stressed concern about the use of cryptocurrencies in the country itself.
No bitcoin payments in Russia
The new ban on bitcoin payments seems to respond to these concerns: paying with bitcoin for goods and services is not allowed in Russia. The rest of the regulation is still under discussion.
Russian citizens may be allowed to own bitcoin, but primarily as an investment object. Another bill that has not yet been approved by the Ministry of Finance contains a licensing scheme for companies that offer trading opportunities and strict
Know your customer (KYC)lines. There will also be purchase limits for consumers, with a mandatory knowledge test that determines the level of the limit.
However, the central bank presented its own and much stricter bill. In it, the central bank is obliged to ban the ‘issuance and circulation’ of digital currencies. Bank transfers to involved legal entities would also be prohibited.
The coming period will show which line gets more support.
Sovereignty for Russia, not for Russians
Much is still unclear, but the Russian stance on Bitcoin is taking shape. The Russian government seems to be interested in the freedom and sovereignty that Bitcoin offers, but at the same time it is afraid that Bitcoin will be used by the people of the country because of the same characteristics.
This is perhaps not very surprising given the strict Russian regime. Contradiction, dissidents and political opponents are hardly tolerated in Russia. Bitcoin turns out to be a gift to opponents because it is an alternative payment network outside the Russian banking system where censorship and confiscation are not possible.
It is, of course, a thorn in the side of strict Russian rule. Supporters of Alexei Navalny, Putin’s biggest political opponent, therefore turned to crypto for fundraising.
It turned out, however, that they had used an international exchange that passed on data to the Russian intelligence services. Although bitcoin addresses are not linked to personal identities on the Bitcoin network, due to the KYC rules, exchanges know which bitcoins they have sold to whom.
Also read our previous articles on Russia!