The Ministry of Finance of the Russian Federation was suspected of preparing regulation of the bitcoin market for a specific player

The concept of regulating the crypto market from the Ministry of Finance of the Russian Federation is a positive sign for bitcoin holders, however, the proposed measures contradict the nature of digital assets and are probably designed for a specific player. This was stated by experts interviewed by Cryplogger.

The Ministry of Finance proposes to carry out cryptocurrency transactions through banks, introduce full user identification and transaction tracking similar to the Swiss service Aximetria, and create a register of exchanges and exchangers.

User identification in cryptocurrency transactions fits into the global experience. However, the proposal to open a bitcoin wallet through a bank sounds at least strange, says BaksDAO partner Eduard Kim.

“The very idea of ​​crypto wallets opened in banks contradicts the idea of ​​cryptocurrencies, which were invented as an alternative to banks. I hardly even technically imagine how this should be implemented. If these wallets need to be opened in a bank, then it turns out that the bank manages them,” he said.

In general, such an approach will require the introduction of new types of licenses for commercial banks and the rules for their interaction with the Central Bank, Mikhail Bystrov (Tretyak), partner and head of the IP / IT practice at DRC law firm, agrees.

The expert was most wary of the direct reference to Aximetria as a positive example of customer identification.

“Given that Tinkoff Bank acquired a share in this service in November 2021, it seems that it is he who is behind this initiative. This is indirectly confirmed by information from a number of sources that Tinkoff has already developed functionality for working with digital currencies,” Bystrov shared.

In the document of the Ministry of Finance, banks are directly called “organizers of the digital currency exchange system.” This leads the expert to the idea that the only task of the Ministry of Finance is to lobby the interests of the largest Russian banks in the confrontation with the Central Bank due to the planned introduction of the digital ruble. In addition, without a unified approach by banks to the processing of personal data, there is a risk of information leakage and a potential increase in cybercrime.

Mikhail Bystrov also considers the division of investors by qualifications and restrictions on the amount of transactions as reasons for the outflow of private traders from the Russian Federation.

The lawyer is also confused by the proposal to divide the functions of market supervision between six state structures: the Central Bank, the Ministry of Finance, Rosfinmonitoring, the Federal Tax Service, the Ministry of Digital Development and the Prosecutor General’s Office.

“It’s safe to say that each of them will impose its own rules. It would be more appropriate to create a separate federal service, formed from specialists with direct experience in working with crypto assets,” Bystrov suggested.

At the same time, the full legalization of cryptocurrencies and mining will no doubt be useful for medium and large businesses, for example, industrial miners who need to convert digital revenue into fiat, said Artem Shtanov, Product Director at EMCD.

“In Europe, KYC procedures are already the standard for cryptocurrency exchanges. If similar rules are written in the Russian Federation, then trading platforms will be able to officially register in Russia and pay taxes. At the same time, banks can retain the function of key agents when transferring digital funds to fiat,” he explained.

Speaking about the regulation of mining, Shtanov pointed out that taxation should be commensurate with the level of costs and risks in this area:

“It makes sense to consider special electricity tariffs for mining companies, as well as benefits for those who are ready to place capacities in depressed regions of Russia or areas with energy surpluses.”

Although the implementation of all initiatives will take a long time, the approach of the Ministry of Finance is encouraging, as it takes into account the interests of all players.

“Potential difficulties may lie in the fact that not all crypto exchanges will want to open representative offices in Russia. Binance, the largest player in the market, looks to be the most ready for such a development of events,” said Vladimir Ananiev, an analyst at Exante.

In a comment to Cryplogger, Gleb Kostarev, director of Binance in Eastern Europe, said that the exchange is ready to issue licenses and create a registry, the main thing is that transparent and understandable rules of the game be created for the market.

“The problem now is not the lack of licenses, but the lack of clear and transparent regulation. This does not allow crypto exchanges to work directly with Russian financial institutions,” he said.

Kostarev added that Binance welcomes the proposal of the Ministry of Finance as the beginning of a dialogue on the legalization of the activities of cryptocurrency organizations in the territory of the Russian Federation. For its part, the exchange is ready to share international experience in this area.

Managing partner of GMT Legal Andrey Tugarin called the position of the Ministry of Finance of the Russian Federation the most adequate in the current realities.

“Neither the state nor the owners of the crypt will benefit from a total ban on cryptocurrencies. The regulation of cryptocurrency will ensure proper protection of the rights of participants in this market,” the lawyer is convinced.

At the same time, he expressed bewilderment why the Russian authorities have bypassed the already existing recommendations for so long. FATF, containing, among other things, the definition of cryptocurrency companies and prescribing their licensing.

The recommendations also established that all transactions for the transfer of virtual assets in the equivalent of $1,000 or more involve the transfer of information about the sender and recipient.

“In its document, the Ministry of Finance uses these approaches and even refers to an intergovernmental organization. Previously, there were no references to the FATF from the ministries regarding the issue of crypto regulation,” Andrey Tugarin said.

The overregulation of the cryptocurrency market, compared to the total ban on digital assets, seems to be a lesser evil, says Lidings adviser and Moscow Digital School teacher Dmitry Kirillov.

“The officially permitted use of the domestic banking infrastructure supervised by the Bank of Russia will make it easier for citizens to make payments in transactions with cryptocurrency. At the same time, I hope for some kind of compromise, when the regulation will not be so strict that it will discourage people from dealing with crypto assets even with formal permission to do so,” he summed up.

Recall that on January 20, the Central Bank of the Russian Federation submitted for discussion a complete ban on the circulation and mining of cryptocurrencies in the country. This approach has already been criticized in the State Duma, the government and law enforcement agencies.

It is expected that the final legislation in the field of the crypto industry in the Russian Federation will be formed before the end of 2023.

Read about the comments of the Central Bank to the concept of the Ministry of Finance on the regulation of cryptocurrencies in the material Cryplogger.

The concept of regulating the crypto market from the Ministry of Finance of the Russian Federation is a positive sign for bitcoin holders, however, the proposed measures contradict the nature of digital assets and are probably designed for a specific player. This was stated by experts interviewed by Cryplogger.

The Ministry of Finance proposes to carry out cryptocurrency transactions through banks, introduce full user identification and transaction tracking similar to the Swiss service Aximetria, and create a register of exchanges and exchangers.

User identification in cryptocurrency transactions fits into the global experience. However, the proposal to open a bitcoin wallet through a bank sounds at least strange, says BaksDAO partner Eduard Kim.

“The very idea of ​​crypto wallets opened in banks contradicts the idea of ​​cryptocurrencies, which were invented as an alternative to banks. I hardly even technically imagine how this should be implemented. If these wallets need to be opened in a bank, then it turns out that the bank manages them,” he said.

In general, such an approach will require the introduction of new types of licenses for commercial banks and the rules for their interaction with the Central Bank, Mikhail Bystrov (Tretyak), partner and head of the IP / IT practice at DRC law firm, agrees.

The expert was most wary of the direct reference to Aximetria as a positive example of customer identification.

“Given that Tinkoff Bank acquired a share in this service in November 2021, it seems that it is he who is behind this initiative. This is indirectly confirmed by information from a number of sources that Tinkoff has already developed functionality for working with digital currencies,” Bystrov shared.

In the document of the Ministry of Finance, banks are directly called “organizers of the digital currency exchange system.” This leads the expert to the idea that the only task of the Ministry of Finance is to lobby the interests of the largest Russian banks in the confrontation with the Central Bank due to the planned introduction of the digital ruble. In addition, without a unified approach by banks to the processing of personal data, there is a risk of information leakage and a potential increase in cybercrime.

Mikhail Bystrov also considers the division of investors by qualifications and restrictions on the amount of transactions as reasons for the outflow of private traders from the Russian Federation.

The lawyer is also confused by the proposal to divide the functions of market supervision between six state structures: the Central Bank, the Ministry of Finance, Rosfinmonitoring, the Federal Tax Service, the Ministry of Digital Development and the Prosecutor General’s Office.

“It’s safe to say that each of them will impose its own rules. It would be more appropriate to create a separate federal service, formed from specialists with direct experience in working with crypto assets,” Bystrov suggested.

At the same time, the full legalization of cryptocurrencies and mining will no doubt be useful for medium and large businesses, for example, industrial miners who need to convert digital revenue into fiat, said Artem Shtanov, Product Director at EMCD.

“In Europe, KYC procedures are already the standard for cryptocurrency exchanges. If similar rules are written in the Russian Federation, then trading platforms will be able to officially register in Russia and pay taxes. At the same time, banks can retain the function of key agents when transferring digital funds to fiat,” he explained.

Speaking about the regulation of mining, Shtanov pointed out that taxation should be commensurate with the level of costs and risks in this area:

“It makes sense to consider special electricity tariffs for mining companies, as well as benefits for those who are ready to place capacities in depressed regions of Russia or areas with energy surpluses.”

Although the implementation of all initiatives will take a long time, the approach of the Ministry of Finance is encouraging, as it takes into account the interests of all players.

“Potential difficulties may lie in the fact that not all crypto exchanges will want to open representative offices in Russia. Binance, the largest player in the market, looks to be the most ready for such a development of events,” said Vladimir Ananiev, an analyst at Exante.

In a comment to Cryplogger, Gleb Kostarev, director of Binance in Eastern Europe, said that the exchange is ready to issue licenses and create a registry, the main thing is that transparent and understandable rules of the game be created for the market.

“The problem now is not the lack of licenses, but the lack of clear and transparent regulation. This does not allow crypto exchanges to work directly with Russian financial institutions,” he said.

Kostarev added that Binance welcomes the proposal of the Ministry of Finance as the beginning of a dialogue on the legalization of the activities of cryptocurrency organizations in the territory of the Russian Federation. For its part, the exchange is ready to share international experience in this area.

Managing partner of GMT Legal Andrey Tugarin called the position of the Ministry of Finance of the Russian Federation the most adequate in the current realities.

“Neither the state nor the owners of the crypt will benefit from a total ban on cryptocurrencies. The regulation of cryptocurrency will ensure proper protection of the rights of participants in this market,” the lawyer is convinced.

At the same time, he expressed bewilderment why the Russian authorities have bypassed the already existing recommendations for so long. FATF, containing, among other things, the definition of cryptocurrency companies and prescribing their licensing.

The recommendations also established that all transactions for the transfer of virtual assets in the equivalent of $1,000 or more involve the transfer of information about the sender and recipient.

“In its document, the Ministry of Finance uses these approaches and even refers to an intergovernmental organization. Previously, there were no references to the FATF from the ministries regarding the issue of crypto regulation,” Andrey Tugarin said.

The overregulation of the cryptocurrency market, compared to the total ban on digital assets, seems to be a lesser evil, says Lidings adviser and Moscow Digital School teacher Dmitry Kirillov.

“The officially permitted use of the domestic banking infrastructure supervised by the Bank of Russia will make it easier for citizens to make payments in transactions with cryptocurrency. At the same time, I hope for some kind of compromise, when the regulation will not be so strict that it will discourage people from dealing with crypto assets even with formal permission to do so,” he summed up.

Recall that on January 20, the Central Bank of the Russian Federation submitted for discussion a complete ban on the circulation and mining of cryptocurrencies in the country. This approach has already been criticized in the State Duma, the government and law enforcement agencies.

It is expected that the final legislation in the field of the crypto industry in the Russian Federation will be formed before the end of 2023.

Read about the comments of the Central Bank to the concept of the Ministry of Finance on the regulation of cryptocurrencies in the material Cryplogger.