Russia's Finance Ministry Wants to Ban Bitcoin, Not the Blockchain

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Russia's Finance Ministry Wants to Ban Bitcoin, Not the Blockchain

Though bitcoin regulation remains a divisive topic globally, there’s perhaps no country that has kept the international bitcoin community guessing about the digital currency’s future more than Russia.

For more than a year, the Ministry of Finance of the Russian Federation, the nation’s economic lawmaking body, has been repeatedly and staunchly against allowing its use as an alternative to government-issued money. Just last month, for example, deputy finance minister Alexey Moiseev told CoinDesk that the Ministry was working on a draft law that would seek to punish those converting cryptocurrencies into the ruble with up to four years in prison.

Outside of these statements, however, the agency’s opinion on bitcoin as a financial technology has been less clear.

Speaking to CoinDesk, Moiseev said that his office was dealing with bitcoin and its underlying technology in different ways:

“We feel that blockchain technology is very important in the development of various Internet-based services.”

Nonetheless, Moiseev remained vocal about the dangers of bitcoin as a means for facilitating payments, though his comments displayed a less aggressive stance than has been outwardly projected by his agency.
“We appreciate the potential relevance of blockchain technology for the development of e-commerce and therefore we feel that it should be allowed and developed, but bitcoin themselves, in particular, the implementation of the bitcoin transactions into the real economy, in the real banking system can be very dangerous,” he concluded.
Moiseev also elaborated on the reasons the Ministry of Finance believes new rules are necessary, citing the digital currency’s association with money laundering and terrorism financing. But while Russia may be looking to potentially criminalise bitcoin-to-fiat conversions, Moiseev said that he did not perceive bitcoin to be a threat to Russia’s national currency.

Bitcoin and terrorism

Since its emergence government regulators have struggled to determine how best to regulate digital currencies, and whether new laws need to be applied to businesses using the technology.
New York, for example, introduced unique state law governing its use, but despite its early movement on this issue, other US states have largely sought to update or apply past statutes to cover the technology.
Of the government organizations that have issued comments on digital currency, many are concerned about that the payment method is being used by cybercriminals, the evidence of which has encouraged fears bitcoin could be leveraged by terrorists, a view that has been given new attention in the wake of last week’s terrorist attacks in Paris.
The topic of terrorism is clearly on Moiseev’s mind as well, as the deputy finance minister expressed concerns about bitcoin potentially making the country’s financial system more vulnerable to exploitation:

“We are very concerned about the potential developments there as we have built serious system of protection against money laundering and financing terrorism using conventional banking system. We are quite afraid of opening this window up by allowing a free convertibility of bitcoins into rubles and back.”

He then went one step further, noting that Russia was monitoring how bitcoin was being regulated by its contemporaries in both Europe and elsewhere.
“We are looking at how bitcoins are being regulated, how they are being protected from potential abuse by money launderers and terrorists,” he added.

Crypto in Russia

Despite adding clarity to the conversation, Moissev’s comments don’t successfully foretell how the technology will be regulated in Russia.

Russia’s central bank has indicated it is against measures that would outlaw its use, and the organization’s view was supported by President Vladimir Putin when he discussed digital currencies for the first time in July this year.

At the time, Putin backed the Bank of Russia’s advocacy for the technology but also implied that bitcoin is “backed by nothing”, and thus might require special oversight.

Although bitcoin’s future remains uncertain in Russia, it is perhaps safe to say that crypto enthusiasts can remain at ease at least for now. The draft law – which would criminalise bitcoin conversions – pursued by the Ministry of Finance is being reviewed by the Cabinet, a process which is expected to take a few months, and will then have to be submitted to the country’s Parliament for final approval.

For a more detailed look at bitcoin’s history in Russia check out our interactive timeline.

Russia flag image via Shutterstock

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