Russian Crypto Regulation Delay Could Hurt Anti-Sanctions Efforts

A senior lawmaker has warned that the lack of clear and timely regulation of the cryptocurrency sector in Russia could undermine the country’s efforts to counter Western sanctions. He also criticized the government’s working groups for failing to introduce the necessary legislation despite holding numerous meetings.

Crypto Regulation: A Matter of National Security

Andrei Lugovoy, the First Deputy Chairman of the State Duma’s Committee on Security and Anti-Corruption, made these remarks at a crypto-related forum organized by the media outlet RBC. He said that the absence of regulation in the crypto industry was playing into the hands of the sanctions policy against Russia. He added that it was also hurting the anti-sanctions policies of the Russian government.

Lugovoy argued that crypto regulation was not only a matter of economic development, but also of national security. He said that crypto assets could be used to bypass the restrictions imposed by the US and its allies on Russia’s access to the global financial system. He also said that crypto assets could help Russia diversify its foreign reserves and reduce its dependence on the US dollar.

He urged the government to adopt a comprehensive and consistent approach to crypto regulation, taking into account the interests of both the state and the private sector. He said that the current situation was unacceptable, as different ministries and agencies had conflicting views on how to regulate crypto.

Crypto Regulation: A Long-Standing Impasse

The issue of crypto regulation has been a long-standing impasse in Russia, as the Finance Ministry, the Ministry of Trade and Industry, the Ministry of Energy, and the Central Bank have been unable to reach a consensus. The former three ministries have been in favor of legalizing the crypto sector, with provisions for crypto miners, regulated exchanges, and anti-money laundering protocols. They believe that legalizing crypto would provide a taxable boost for state coffers, as well as stimulate the tech and financial sectors.

However, the Central Bank has been firmly opposed to crypto in almost all forms, except for its own digital ruble project. The bank has argued that crypto poses risks to financial stability, consumer protection, and monetary sovereignty. It has also expressed concerns about the potential use of crypto for illicit activities, such as money laundering, terrorism financing, and tax evasion.

The impasse has resulted in delays and contradictions in the legislative process. The first crypto law, “On Digital Financial Assets”, was adopted in 2021, but it only defined the basic terms and concepts related to crypto, without providing any clarity on the legal status, taxation, or regulation of crypto activities. The second crypto law, “On Digital Currency”, which was supposed to address these issues, has been postponed several times and is still under discussion.

Crypto Regulation: A Call for Action

Lugovoy criticized the various government working groups that were created to break the deadlock and draft the crypto legislation. He said that these groups had held billions of meetings, but had made no progress in introducing the necessary legislation. He said that this was unacceptable, as the crypto industry was developing rapidly and needed clear and predictable rules.

He also said that the lack of regulation was causing problems for Russian businesses that wanted to use crypto for settlements with foreign partners. He said that many of these businesses had to resort to foreign jurisdictions, such as Switzerland, Singapore, or Estonia, where crypto regulation was more favorable and transparent. He said that this was a loss of potential revenue and innovation for Russia.

He called on the government to act swiftly and decisively to regulate the crypto sector, in order to protect the national interests and sovereignty of Russia. He said that crypto regulation was not a matter of choice, but of necessity, in the face of the changing global economic and geopolitical landscape.