It seems that Russian lawmakers, no matter how hard they try, cannot solve the problem of cryptocurrency regulation without banning digital assets.

Both the Russian Ministry of Finance (Minfin) and the central bank announced their own regulation for the cryptocurrency market last Friday.

While Minfin’s draft law proposes policy easing for crypto investors, the central bank still recommends cryptocurrencies as illegal assets of any kind and imposes heavy penalties for handling them.

Maria Stankevich, development director at cryptocurrency exchange EXMO, told RBC:

“Recently, the crypto regulatory situation in Russia has been quite mixed. At first the central bank wanted to ban everything, then President Vladimir Putin said that a draft law was being prepared by the Ministry of Finance.

Different opinions

Stankevich further explained that crypto exchanges in the country have been actively discussing the possibilities and procedures to be adopted in other countries, compared with the Lower House of the Federal Assembly (State Duma) to improve existing draft laws.

“And then the central bank released another document proposing to ban everything, along with a very heavy penalty.

Nobody at the central bank really understands the cryptocurrency market. As always, Vladimir Putin will make the final judgment. But he’s made his point, so Treasury will be the winner.”

Is Minfin’s suggestion really better?

In theory, Minfin’s blueprint seems a bit more convenient for crypto enthusiasts. Accordingly, cryptocurrencies will at least have the potential to exist as an investment vehicle, although payments for digital assets are still illegal.

But Minfin’s draft law also sets draconian limits for investment purposes. First of all, even home users who have successfully passed some special “tests” to prove their knowledge of cryptocurrencies will not be able to invest more than 600,000 rubles (about $7,600) per year in digital assets. Meanwhile, those who fail this test can only invest in cryptocurrencies a maximum of 50,000 rubles ($630) per year.

Nikita Soshnikov, the director of cryptocurrency exchange Alfacash, said:

“This request is understandable considering that financial authorities are trying to protect Russians from hasty investments in cryptocurrencies and the potential risks involved. But on the other hand, the limit of 50,000 rubles seems too strict.”

Promote the development of institutional investors

Soshnikov added that it’s not really clear why retail investors who pass the test can’t invest more than $7,600 per year in crypto. Meanwhile, investments in shares of Russian companies are not subject to these strict rules.

Over the past few days, company stocks have also shown strong volatility as they face many geopolitical risks. Soshnikov also wondered that these limits are not imposed on qualified investors and legal entities, i.e. the government is somewhat biased towards institutional investments in the crypto market.

Of course, the restrictions suggested by Minfin don’t end there. In addition to strict KYC requirements, all crypto exchanges must file a declaration with a specialized registry and obtain the appropriate license from an authorized authority.

“Basically a total ban”

Sergey Mendeleev, CEO of financial services provider InDeFi Smartbank, expressed his displeasure with the bill. He emphasized that for now, Minfin’s proposal is little more than a mass ban on cryptocurrencies.

“Everyone understands that it is basically a total ban, with no distinction between the Central Bank and Treasury proposals. Both make crypto-related activities in the Russian Federation impossible.”

But at least you will know how to deal with the new bills, he says sarcastically.

“Roskomnadzor’s stupid bans made everyone know how to use VPN and TOR. Therefore, crypto-related actions will only contribute to the formation of a truly decentralized market and increasingly demonstrate the obsolescence of the traditional banks that have existed over the past decade.”

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