Russia’s central bank has issued new guidelines regarding transactions to and from crypto exchanges.
In a bulletin issued yesterday, the bank equated the use of cryptocurrencies with illegal activities such as money laundering, gambling and black market trading.
Russia and crypto regulation
It is well known that many ransomware attacks originate in Russia and that cybercriminals often prefer to be paid in cryptocurrencies, so Russia’s central bank is right to assume that some of the cryptocurrencies held by some of its citizens may have come from illicit activities.
Russia is one of the countries with the largest use of cryptocurrencies in the world, despite the fact that there are no explicit and positive regulations in this regard.
One of the advantages of cryptocurrencies is the total financial freedom granted to their users, which is something foreign to the Russian authoritarian regime.
According to the Democracy Index, Russia is effectively defined as an authoritarian regime, with an index of just over 3 out of 10, which is far from countries that are considered quite democratic, such as the USA (7.92) and in line with other countries that are commonly considered authoritarian, such as Cuba (2.84) or Myanmar (3.04).
Russia also ranks very low on the Economic Freedom Index, roughly on a par with El Salvador and Vietnam, and significantly lower than Mongolia, Turkey and Jordan.
It is therefore not surprising that a number of Russians prefer to use cryptocurrencies, even for activities considered illegal in the country.
Russian central bank rules on crypto and crypto exchanges
Russia’s central bank has recommended that credit institutions providing online services for transferring funds from individuals should implement measures to analyze their customers’ requests, using protocols for exchanging information with the authorities.
It also asked them to avoid using fast payment solutions, and instead always require users’ identities to be verified when making any money movements.
Moreover, it set out guidelines for identifying and blocking accounts engaged in suspicious activity, including cryptocurrency trading.
Russians who transact to and from cryptocurrency exchanges will be ”specially observed” by banks and government authorities, whether the funds they use come from illegal or legitimate activities.
In Russia, it is not forbidden to own and use cryptocurrencies, but exchanging them for roubles is not welcome. Nevertheless, it is worth mentioning that stablecoins come to the aid of those who want to use cryptocurrencies and tokens for foreign transactions without having to worry about the high volatility of prices.
CDBCs in Russia
The Russian state and central bank have also been considering the issuance of a Central Bank Digital Currency (CDBC) for some time, but it is unthinkable that it could be used by Russian citizens instead of cryptocurrencies, precisely because a CBDC has the same limitations, and the same levels of censorship as the electronic versions of current fiat currencies.
One of the great strengths of cryptocurrencies that induces Russians to use them is the high degree of financial freedom they can grant, which is difficult to obtain from the regime by which they are currently governed.