Russia Moves to Ban Cryptocurrency Circulation with Exceptions for Central Bank Experiments

In a significant development, the State Duma of Russia has proposed amendments to the latest draft law on cryptocurrency mining that includes a provision to ban the general circulation of cryptocurrencies starting September 1. This move seeks to tighten the regulation around digital currencies in Russia, with the aim of controlling its impact on the financial system, according to Kommersant.

The proposed amendments make an exception for test projects conducted by the Central Bank of Russia, which will be allowed under an experimental legal regime (EPR). These projects aim to explore the potential and implications of cryptocurrency within controlled environments, helping to inform future regulatory decisions.

The bill, initially introduced on November 17, 2022, underwent several revisions and technical clarifications before being adopted in its first reading on April 19, 2024. Among the key revisions are detailed criteria defining what constitutes the organization of digital currency circulation in Russia. This includes transactions involving Russian legal entities or individuals who reside in Russia for more than 183 days within a year, and transactions using Russian information infrastructure.

Currently, Russian law prohibits cryptocurrency settlements but does not explicitly ban its circulation. The new legislation aims to fill this gap by establishing a clear legal framework that restricts the circulation of digital currencies while allowing for certain exceptions managed by the Central Bank.

Initially, the bill also aimed to regulate how miners could sell the cryptocurrency they produce, either through foreign systems outside of currency regulation or via a special platform operating within Russia’s experimental legal framework. The amendments follow a broader strategy to bring mining activities into the legal fold, potentially stabilizing the market and mitigating risks associated with unregulated digital currency operations.

This legislative effort indicates a cautious yet structured approach by Russian authorities towards embracing cryptocurrency, focusing on creating a sustainable ecosystem that aligns with national financial and security policies.