According to a Monday article by the local news agency Izvestia, the Association of Banks of Russia has reportedly urged that lawmakers ban self-custody crypto wallets in order to avoid “severe challenges” with the recovery and seizure of cryptocurrency from debtors and criminals.
The news agency quotes a letter that the Association reportedly addressed to the Bank of Russia, the Ministry of Finance, and the Russian Federation’s Federal Financial Monitoring Service for consideration.
Non-custodial or self-custodial wallets provide users with direct and absolute ownership of their crypto assets, as opposed to custodial wallets, which rely on third parties such as centralized exchanges to keep the user’s private keys. Self-custody wallets, when properly protected, make it impossible for anybody other than the owner to transfer the crypto assets kept within them.
According to Anatoly Kozlachkov, vice president of the banking organization, the regulatory framework developed in collaboration with the Ministry of Internal Affairs originally proposed criminalizing self-custody. Despite the fact that this approach seemed “more rational,” Kozlachkov stated that the Association was currently leaning towards a softer approach that would not criminalize the ownership of cryptocurrency in self-custody wallets, but rather the failure to disclose private keys to authorized bodies.
If a debtor or a criminal is linked to their self-custody wallet, they will be offered the option of surrendering the private key or facing penalties for hiding property in the form of digital assets, according to the document.
According to the banking organization, Russia intends to build a “closed circuit” crypto-economy within its borders, which is impossible without developing a method of controlling the foreclosure of assets kept in non-custodial wallets.
The country is presently weighing two opposing approaches: one supported by the Bank of Russia, which proposes a blanket ban on all cryptocurrency use and mining, and the other supported by the Ministry of Finance, which aims to regulate cryptocurrencies within the existing financial system.
Despite several requests to ban cryptocurrencies or otherwise hinder their adoption by Russia’s banking community, the Russian government appears to prefer the finance ministry’s more measured approach and is leaning toward regulating rather than prohibiting the asset class.
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