Russian Government to Recognize Bitcoin as Form of Currency

The Russian government is set to recognize Bitcoin (BTC) as a legal form of currency in the country,  after an agreement with the Central Bank of Russia, according to a statement on February 8. Reports from Kommersant, a local news outlet, states that the Russian government and the central bank are currently drafting legislation and amending existing laws, that will define crypto as an “analogue of currencies “rather than digital financial assets, and is set to be launched on February 18.

Additional reports suggest that all Bitcoin transactions and possession of any kind of cryptocurrency in the Russian Federation are not prohibited. However, users must trade or purchase such digital coins only through a “digital currency exchange organizer” (a bank) or a peer-to-peer exchange licensed in the country.

Thus, cryptocurrencies would legally function in the country only if they have complete identification through the banking system or via licensed intermediaries.

According to a rough translation of an accompanying draft paper, the Russian Government regulation will aim to integrate a mechanism for the circulation of digital currencies into the country’s financial system while ensuring control over credit institutions’ cash flows.

“The establishment of rules for the circulation of cryptocurrencies and control measures will minimize the threat to the stability of the financial system and reduce the use of cryptocurrencies for illegal purposes since a complete ban on the segment of operations related to their circulation is impossible,” the document reads.

Officials also stated that the regulation would assure the protection of citizen rights under a licensing scheme focused on cryptocurrency providers. Exchanges and other providers will also need to have “financial airbags” in terms of liquidity and capital.

“The complete absence of regulation of this industry, as well as the establishment of a ban, will lead to an increase in the share of the shadow economy, an increase in fraud cases and destabilization of the industry as a whole,” the document further reads.

The latest agreement, according to reports, also states that cryptocurrency transactions of more than 600,000 rubles (almost $8,000) would have to be declared or be considered a criminal act with fines in place for citizens who illegally accept cryptocurrencies as payment.

The latest development, even though has been met with a lot of applause, also appears to be shocking, as the Bank of Russia, just last month, proposed that all bitcoin miners, as well as other cryptocurrency operations nationwide, be banned, citing concerns that they could endanger the country’s financial system. The bank also prohibited all financial firms from facilitating any crypto transaction as part of the proposal.

While it is unknown what this decision will entail for Russian citizens and businesses, it appears that the country, once a hostile environment for cryptocurrencies,  is gradually gearing towards its adoption.