New Russian Cryptocurrency Law Leaves Zero Privacy

  • It will not be possible under the law to use cryptocurrency as a means of payment.
  • All transactions will have to be made only through digital financial asset exchange operators.
  • There will be no privacy associated with the cryptocurrency in Russia.

On July 24, a new federal law in Russia was passed, regulating relations arising from the issuance, accounting and circulation of digital financial assets. The announcement was only made this week pertaining to the new law. Furthermore, in 2021, it will be possible to conduct transactions with cryptocurrency in Russia.

A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange wherein individual coin ownership records are stored in a ledger existing in a form of computerized database using strong cryptography to secure transaction records, to control the creation of additional coins, and to verify the transfer of coin ownership.

The law also covers the specifics of the activities of the operator of the information system in which digital financial assets are issued, and the operator of the exchange of digital financial assets, as well as relations arising from the circulation of digital currency in the Russian Federation.

It will not be possible under the law to use cryptocurrency as a means of payment. In general, cryptocurrencies will acquire the status of a standard financial asset, but only in digital form. The document defines digital financial assets as digital rights that can only be issued, registered, and circulated through entries in an information system based on a distributed registry.

It would have to be via blockchain. They may be subject to collateral, purchase and sale transactions, exchange of one type of CFA for another (including those issued under the rules of foreign information systems), or for digital rights of other types. But CFA is not, and is not recognized as a means of payment.

Moreover, all transactions will have to be made only through digital financial asset exchange operators, the Bank of Russia previously indicated. These are mainly banks and exchanges.

The Central Bank of the Russian Federation, also known as the Bank of Russia, is the central bank of the Russian Federation, founded in 1860 as The State Bank of the Russian Empire, headquartered on Neglinnaya Street in Moscow. Its functions are described in the Russian constitution (Article 75) and in the special Federal Law.

The Russian Central Bank believes that the law will allow to convert traditional financial instruments into digital form, and expand alternative ways to attract investment, as well as protect investors and citizens from financial pyramids.

Individuals registered as individual entrepreneurs and legal entities (commercial and non-commercial organizations) have the right to make records on the release of digital financial assets in the information system.

The Bank of Russia has the right to determine the characteristics of CFA that unqualified investors can acquire and limit the amount of their investments in such assets.

According to Article 3.1 of the law, the decision to issue digital financial assets must contain

“Information about the person issuing digital financial assets, including for an individual – surname, first name, patronymic (unless otherwise provided by law or national custom), place of residence, information about state registration as an individual entrepreneur, for a legal entity-full name, address, information about state registration, information about the beneficial owner, as well as information about the website of the person issuing digital financial assets in the information and telecommunications network ‘Internet.'”

Hence, there will be no privacy associated with the cryptocurrency in Russia. However, the conditions are very similar to China.  It should be noted that China launched its own cryptocurrency in April of this year. The new Chinese cryptocurrency has zero provisions for privacy either.

In the case of Russia, it is not launching its own cryptocurrency as of yet. At the same time, like China, the Kremlin is making sure there will be no privacy or anonymity in Russia.

It is clearly another step for the Kremlin to control Russia.

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Christina Kitova

I spent most of my professional life in finance, insurance risk management litigation.

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