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Russian authorities draw up ‘road map’ to regulate cryptocurrencies

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Russian authorities have drawn up a ‘road map’ that envisages restrictions on cryptocurrencies but not a complete ban on trading and mining as advocated by the central bank, a document seen by Reuters showed on Friday.

Politicians have pressed for a change of tack by the central bank, which has proposed restricting cryptocurrency trading and energy-intesive mining on Russian territory because of concerns it may cause financial instability.

President Vladimir Putin has asked those involved to find a consensusand a working group, including the finance, economy, digital and interior ministries, the FSB security service, and the central bank, has been working on such a plan.

Deputy Prime Minister Dmitry Chernyshenko has signed the road map, according to the document, first reported by business daily RBC.

A representative for Chernyshenko confirmed the document’s authenticity.

REGULATORY RIFT

“We note that the points of the road map were supported in full by all agencies, with the exception of the Bank of Russia,” the document said.

The central bank said it was familiar with the draft of the road map.

“We believe it is necessary to prepare a federal law, establishing a ban on the issue and circulation on Russian territory of private digital currencies and also to determine liability for violating this ban,” the central bank said in a statement.

“We are not saying we intend to ban the ownership of cryptocurrencies,” Elizaveta Danilova, head of the central bank’s financial stability department, stressed later on Friday.

Fitch Ratings said Russia’s proposed ban would limit the financial system’s exposure to risk, but may curb innovation and hinder Russian banks’ technological development in the longer term.

The working group’s proposal would allow for the buying and selling of cryptocurrencies to be provided exclusively by Russian banking organisations.

It proposes creating procedures to block foreign crypto exchanges from offering services to users in Russia but suggests foreign platforms could obtain licenses to operate in the country.

Binance, the world’s largest cryptocurrency exchange, told Reuters this week it wanted to expand in Russia.

The Digital Ministry said a ban on cryptocurrencies would dramatically slow the pace of the IT industry’s development, pointing to the numerous cryptocurrency projects with Russian roots, and called for the road map’s swift approval.

“There is no final decision,” central bank’s Danilova said. “The central bank has no right to take legal initiative…we will now be actively communicating with all parties.”

CRYPTO MINING

The central bank continues to oppose cryptocurrency mining, whereby powerful computers compete against others hooked up to a global network to solve complex mathematical puzzles, warning of inefficient energy consumption and its environmental impact.

It said power outages in Kazakhstan, the world’s second-largest bitcoin mining hub, showed what problems mining could cause. However, Putin this week said Russia was well-placed to cope, pointing to the competitive advantages of surplus electricity and well-trained personnel.

In August, Russia accounted for 11.2 per cent of the global “hashrate” – crypto jargon for the amount of computing power being used by computers connected to the bitcoin network.

This year, Russia plans to test a digital rouble to facilitate payments for individuals and businesses and try to make its currency more global in the face of Western sanctions.

Fitch said the digital rouble may result in some deposit outflows from the banking system, modestly increasing competition for funding and raising interest rates.

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