The Bank of Russia is talking with market players and experts about several potential options to make its ban on cryptocurrency investments possible.
One source told the Russian edition of Forbes magazine the proposed restrictions may apply to card payments to certain recipients, such as crypto exchanges or wallets. Another source close to the central bank further explains that the process would include blocking payments using certain codes.
This is where the MCC, or Merchant Category Code, comes into play as a four-digit number for categorizing transactions users carry out with any particular card.
Since 2018, Visa and Mastercard have reclassified the way cryptocurrency purchases are processed on their networks. The digital asset transactions are now identified with the 6051 MCC code. As such, MCCs can be used to identify and block cryptocurrency transactions that may be illegal in some jurisdictions.
Until now, Russian banks are allowed to open up accounts for cryptocurrency exchanges, but only under the supervision of the central bank. This was a more pragmatic attitude towards cryptocurrencies and their adoption in Russia.
“A large number of Russians own the cryptocurrency. At the same time, cryptocurrencies are volatile, unsupported and opaque for regulators. However, now their ban can create problems for millions of compatriots, since it will make illegal what they already own. In this regard, various options for regulation are currently being worked out. It is planned to develop a consolidated position on this issue in 2022,” the press service of the Ministry of Finance commented told Forbes.
Crypto volume hits $5 billion
The story of the legislation surrounding Russia’s attitude to cryptocurrency is still developing. The country for years had spoken against digital assets, saying cryptocurrencies could be used to launder money or finance terrorism. Ultimately, the nascent industry was given a legal status, but Russia banned relevant assets from being used as a means of payment.
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.