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Russian Central Bank turns against bitcoin

The Central Bank of Russia recently came out against Bitcoin, claiming that their local ruble should be the “nation’s legal tender”, and the country may soon issue a ban on all cryptocurrency payments. Experts now have actual confirmation that Russia would support any legislative decision regarding a ban. Despite that, not just Bitcoin, but the entire cryptocurrency industry in Russia is in a bit of a legal limbo.

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The issue of cryptocurrency legalization in Russia has remained unresolved for several years now but Bitcoin’s days may be numbered. A new initiative shown recently by regulators to push for a ban of token payments has seriously worried the local crypto community, given that the outcome is deeply uncertain.

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Russia bans crypto trading

In November 2019, the Central Bank and Rosfinmonitoring were preparing an initiative to ban the use of cryptocurrency to pay for purchases in Russia. Regulators want to introduce criminal liability in terms of five to eight years for violation of this rule. It will also be impossible to transfer money in digital coins for specific services. Many Russian freelancers work in the cryptographic industry and are paid in tokens. Such activities may turn out to be illegal.

Despite the fact that Russian developments rarely affect the general course of the main cryptocurrency, this time it coincided that the next fall of Bitcoin occurred just after the media picked up news of the new initiative. On November 19, the day the news of the possible ban came out, the average market value of the first digital coin was estimated at $8,309, the next day the Bitcoin cost $8,206, and a week later $7,146.

BTC’s sustained decline

The decrease in the value of the BTC also occurred after it became known that the Russian Interior Ministry, together with other law enforcement agencies, should develop proposals for the seizure of cryptocurrencies and other virtual assets by the end of 2021. The news appeared in the media on November 7, when the main asset was estimated at $9,360, two days later the cost of Bitcoin fell to $8,804.

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In parallel to these initiatives and proposals of the State Duma, the draft law “On Digital Financial Assets” (DFA) continues to be finalized. The document was first read in May 2018. On May 22, 2018, the State Duma passed three draft laws: “On Digital Rights”, “On Digital Financial Assets” and “On Investment Attraction Using Investment Platforms”.

Woman keeping a Bitcoin in her hand
Despite China’s ban on the commercial circulation of cryptocurrencies, the country remains an influential player in the global digital industry (Image by Icons8_team via Pixabay)

Bitcoin’s future remains uncertain

At that time, this event had almost no negative impact on the value of the first cryptocurrency. On May 22, Bitcoin was worth $7,963, the next day the rate fell to $7,680, and by May 28, the value of the first cryptocurrency had already reached $8,805.

The second reading has already been postponed several times. In August this year, Prime Minister Dmitry Medvedev instructed the State Duma and the Ministry of Finance to adopt the draft law “On Digital Financial Assets” by November 1, 2019.

If the bans on Russian regulators come into effect, minor price fluctuations and a brief decline in the exchange rate of Bitcoin are not ruled out. However, these are not all negative consequences.

New crypto bans 

Until the law on legalization of cryptocurrencies comes into force in Russia, no officially registered financial institution will risk dealing with cryptocurrencies. If Rosfinmonitoring and the Central Bank will forbid financial organizations to deal with digital assets, the domestic cryptographic industry will remain the domain of only individuals.

It is also possible that the new bans will only lead to the development of an illegal field in Russia. Thus, Anatoly Aksakov, chairman of the State Duma Committee on Financial Market, believes that it’s possible to prohibit the use of the cryptocurrency as a means of payment, but it’s going to be extremely difficult to actually enforce the decision in the next few years. He has repeatedly pointed out that Russian market players have already learned to bypass laws and regulations, and in any case, will use the cryptocurrency.

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New bans often fuel interest in the digital industry. For example, Chinese investors, traders and cryptocurrency companies, after various tightening by regulators, continued their activities and found new ways to work with cryptocurrency assets. In addition, despite China’s ban on the commercial circulation of cryptocurrencies, the country remains an influential player in the global digital industry, an advanced mining and blockchain player.

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(Featured image by madartzgraphics via Pixabay)

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First published in РБК, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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Leah Marie Angelou is an LGBTI activist and equality advocate. She has been a writer for several feminism-focused groups for nearly a decade. Her pieces are often focused on career development and the workplace. She also regularly covers personal and micro-finance, business management and entrepreneurship. Recently she has also focused on covering the promising CBD and hemp industry.