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Bank of Russia Mulls Ban on Cryptocurrency Investments

Russia’s central bank is mulling a new plan to prohibit investing in cryptocurrencies in the country amid concerns that it could threaten financial security.

According to a Reuters report, the bank officials are now in talks with market players and experts about a possible ban that would apply to new purchases of crypto assets. If the ban is approved, it would not apply to assets purchased in the past, Reuters cited two unnamed sources close to the financial regulator.

Another source said the central bank’s current position is a “complete rejection” of all cryptocurrencies.

In reply to a Reuters request for comment, Bank of Russia said it was preparing an advisory report to voice its stance on the issue, but it didn’t mention any specifics.

A sharp shift has occurred in the Russian regulators’ attitude towards cryptocurrencies after China declared all cryptocurrency transactions illegal in September. The increasing popularity of cryptocurrencies has raised concerns about financial stability, Central Bank First Deputy Governor Ksenia Yudaeva said earlier this month.

Russia’s crypto market has boomed since the country’s regulators overturned a previous ban and made it illegal to pay for goods and services in cryptocurrencies, though it is legal to invest in them.

The annual turnover of digital asset transactions carried out by Russian traders and investors hit $5 billion in 2021, the central bank says.

Russia orders public officials to declare crypto assets

Earlier in August, Russian President Vladimir Putin approved the National Plan for Countering Corruption for 2021–2024, which proposed inspections of officials who are obliged to disclose their digital assets and currency. Russian officials, as well as their spouses and children, are required to report their crypto holdings to the tax authority if the total transaction amount exceeds RUB 600,000 in a calendar year.

Before that, the Russian government asked public officials who own or trade cryptocurrencies to disclose their holdings, and the first reporting deadline was June 30, 2021.

According to an order signed by Putin, Russian public officials who were required to report their cryptocurrency holdings will have their disclosures audited by the central bank and other authorities.

Within this context, Putin has instructed the Bank of Russia to cooperate with the ministries of finance and labor to propose crypto-asset inspections.

Failing to disclose data or deliberately providing false information is a criminal offence. Penalties for unreported crypto transactions include a jail term of up to three years and a fine ranging from 500,000 rubles to 2 million rubles.

In an effort to foster regulatory clarity in the Russian cryptosphere, the central bank has proposed fresh guidelines to govern market participants and floated the idea of a digital ruble.