What's Wrong With Cryptocurrency Regulation in Russia
Posted: Wed Jan 22, 2025 4:32 am
dubious cryptocurrency transactions. This is due to the need to regulate crypto exchanges and exchangers, the deputy head of Rosfinmonitoring told RBC
Russia has seen one of its FATF (Financial Action Task Force) ratings downgraded due to insufficient regulation of virtual assets and cryptocurrencies, according to a new report on the technical compliance of the country's anti-money laundering system with the organization's recommendations, which RBC reviewed.
Russia underwent bolivia whatsapp number database a full FATF review in 2019, receiving the highest level of compliance. From July to December 2023, an analysis of the country's progress in applying anti-money laundering standards was conducted. It was done by experts from the Eurasian Group on Combating Money Laundering and Terrorist Financing (EAG, a subgroup of FATF), the assigned scores were approved at the FATF plenary meeting on February 23, Deputy Head of Rosfinmonitoring German Neglyad explained to RBC.
The FATF rating is a gradation of countries around the world based on their level of compliance with the recommendations of the international group, and includes 40 key recommendations. Methods of monitoring and countering suspicious transactions with virtual assets and cryptocurrency are listed in a separate recommendation, under No. 15. According to it, Russia's rating was lowered from "compliant" to "partially compliant".
The FATF recommendations on reducing the risks of using virtual assets, primarily cryptocurrencies, were updated several years ago, Neglyad said: "Now the extent to which Russia complies with the already amended recommendations has been assessed. Russia's rating was downgraded to partial compliance, which indicates that there are still shortcomings in this area. First of all, this is the need to regulate the turnover of cryptocurrency, that is, the activities of cryptocurrency exchanges and exchangers by analogy with financial organizations."
According to the report, Russia has "taken certain steps" to regulate the sphere of operations with virtual assets, but this was not enough. In the summer of 2020, the Law on Digital Financial Assets (DFA, 259-FZ) was adopted. It defines the circle of providers of digital financial assets - operators of systems in which DFA are issued and exchanged. But Russian legislation still does not establish who can act as providers of digital currencies, including cryptocurrencies; there is only a ban on residents using digital currencies as a means of payment.
"Some bills related to the circulation of digital currencies are still in development. This shortcoming affects the entire recommendation," the experts' report says.
In the winter of 2022, the Bank of Russia developed a bill banning the issuance and circulation of cryptocurrencies. The Ministry of Finance did not agree with this initiative. The agency prepared its own concept for regulating cryptocurrencies. According to it, citizens and companies should carry out such transactions through banks, and the participants in the transactions should be identified.
In November 2022, a bill on the legalization of cryptocurrency mining was introduced to the State Duma; it also regulates the use of cryptocurrencies in international settlements for exporters who are currently experiencing problems with settlements through traditional financial channels. The Central Bank and the Ministry of Finance have a unified position on this bill, but it has not yet been adopted. Amendments to another bill (adopted by the State Duma so far) only allowed exporters and importers to use digital financial assets (DFA) for external settlements, but this type of asset, recently introduced in Russia, does not apply to cryptocurrencies.
Last December, Rosfinmonitoring warned that slow progress in cryptocurrency regulation was creating risks for Russia's FATF ratings.
Neglyad notes that Russia's assessments on three FATF recommendations were improved - from "partially compliant" to "significantly compliant". This indicates that Russian government agencies and the private sector have systematically worked to improve the anti-money laundering system, the deputy head of Rosfinmonitoring believes: "This is especially true for recommendations on compliance with measures to freeze the assets of persons included in the UN Security Council sanctions lists. These are individuals and legal entities associated with the financing of terrorism, terrorism and the financing of the proliferation of weapons of mass destruction. The technical compliance of Russian legislation with the FATF recommendations in this area was improved and assessed positively."
Russia has seen one of its FATF (Financial Action Task Force) ratings downgraded due to insufficient regulation of virtual assets and cryptocurrencies, according to a new report on the technical compliance of the country's anti-money laundering system with the organization's recommendations, which RBC reviewed.
Russia underwent bolivia whatsapp number database a full FATF review in 2019, receiving the highest level of compliance. From July to December 2023, an analysis of the country's progress in applying anti-money laundering standards was conducted. It was done by experts from the Eurasian Group on Combating Money Laundering and Terrorist Financing (EAG, a subgroup of FATF), the assigned scores were approved at the FATF plenary meeting on February 23, Deputy Head of Rosfinmonitoring German Neglyad explained to RBC.
The FATF rating is a gradation of countries around the world based on their level of compliance with the recommendations of the international group, and includes 40 key recommendations. Methods of monitoring and countering suspicious transactions with virtual assets and cryptocurrency are listed in a separate recommendation, under No. 15. According to it, Russia's rating was lowered from "compliant" to "partially compliant".
The FATF recommendations on reducing the risks of using virtual assets, primarily cryptocurrencies, were updated several years ago, Neglyad said: "Now the extent to which Russia complies with the already amended recommendations has been assessed. Russia's rating was downgraded to partial compliance, which indicates that there are still shortcomings in this area. First of all, this is the need to regulate the turnover of cryptocurrency, that is, the activities of cryptocurrency exchanges and exchangers by analogy with financial organizations."
According to the report, Russia has "taken certain steps" to regulate the sphere of operations with virtual assets, but this was not enough. In the summer of 2020, the Law on Digital Financial Assets (DFA, 259-FZ) was adopted. It defines the circle of providers of digital financial assets - operators of systems in which DFA are issued and exchanged. But Russian legislation still does not establish who can act as providers of digital currencies, including cryptocurrencies; there is only a ban on residents using digital currencies as a means of payment.
"Some bills related to the circulation of digital currencies are still in development. This shortcoming affects the entire recommendation," the experts' report says.
In the winter of 2022, the Bank of Russia developed a bill banning the issuance and circulation of cryptocurrencies. The Ministry of Finance did not agree with this initiative. The agency prepared its own concept for regulating cryptocurrencies. According to it, citizens and companies should carry out such transactions through banks, and the participants in the transactions should be identified.
In November 2022, a bill on the legalization of cryptocurrency mining was introduced to the State Duma; it also regulates the use of cryptocurrencies in international settlements for exporters who are currently experiencing problems with settlements through traditional financial channels. The Central Bank and the Ministry of Finance have a unified position on this bill, but it has not yet been adopted. Amendments to another bill (adopted by the State Duma so far) only allowed exporters and importers to use digital financial assets (DFA) for external settlements, but this type of asset, recently introduced in Russia, does not apply to cryptocurrencies.
Last December, Rosfinmonitoring warned that slow progress in cryptocurrency regulation was creating risks for Russia's FATF ratings.
Neglyad notes that Russia's assessments on three FATF recommendations were improved - from "partially compliant" to "significantly compliant". This indicates that Russian government agencies and the private sector have systematically worked to improve the anti-money laundering system, the deputy head of Rosfinmonitoring believes: "This is especially true for recommendations on compliance with measures to freeze the assets of persons included in the UN Security Council sanctions lists. These are individuals and legal entities associated with the financing of terrorism, terrorism and the financing of the proliferation of weapons of mass destruction. The technical compliance of Russian legislation with the FATF recommendations in this area was improved and assessed positively."