Russia central bank calls digital currency circulation ‘unjustified risk’

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The long-awaited Russian attempt at regulating digital currencies has taken another twist today, following revelations from a senior official at the Bank of Russia suggesting the issuance and circulation of digital currencies could be banned.

Alexey Guznov, head of legal at the central bank, was quoted by local news agency Interfax saying the latest draft of the bill “On Digital Financial Assets” will outlaw circulation and issuance of digital currency in Russia.

If confirmed, this would represent another significant U-turn from initial drafts of the legislation, which originally permitted digital currency trading within the country. Under the new law as suggested by Guznov, Russians will be outlawed from using digital currency at all, beyond holding digital assets they already own.

Guznov said the new law would include penalties for those found to be issuing or using digital currencies illegally, citing consumer protection and safeguarding the financial system as the primary reasons for the ban:

In terms of the functioning of the financial system and consumer protection system, legalization of the issuance and facilitating the circulation of cryptocurrencies is an unjustified risk. As such, the bill explicitly prohibits emission and organization of cryptocurrency circulation, introducing legal liability for violating these rules.

When probed on whether the new law will prevent Russian residents from converting digital currency to fiat, Guznov did not answer the question directly. Instead, he said the bank was limited in the scope of what it could regulate.

If a person who owns, for example, Bitcoins, completes a transaction in a jurisdiction that does not prohibit this, we are unlikely to be able to regulate that.

The comments are only the latest to emerge around the as-yet-unfinished bill, which has been under consideration for several years.

First proposed in January 2018, the drafting process has been beset by policy disagreements between different stakeholders, with the Bank of Russia and the Ministry of Finance apparently at odds about whether to legalise digital currency in the country.

Despite the proposed ban, the central bank has been reported to be working on a digital currency of its own, with bank chief Elvira Nabiullina saying plans for a digital ruble were already being explored.