Storing cryptocurrencies in non-custodial wallets in Russia could be criminalized if authorities accept the proposal of a trade association representing Russian banks. While financial regulators see the idea as a cause for concern, lawmakers and experts doubt that such a measure is possible.
Bank of Russia moves to curb the use of private cryptocurrency wallets
Anatoly Kozlachkov, vice president of the organization, told Izvestia this week, Anatoly Kozlachkov, vice president of the Association of Russian Banks (ABR), told Izvest this week that ABR) Challenges to Foreclosures and Forfeitures of Crypto Assets Held by Debtors and Criminals Proposes Introducing Criminal Liability for Depositing Coins in Non-custodial Wallets.
The ABR’s initial proposal, with the advisory assistance of the Russian Interior Ministry, is to criminalize the undeclared storage of cryptocurrencies in such wallets. Kozlachkov said the association is now leaning towards refusing to provide wallet keys when requested by authorities.
ABR said it does not refer to digital assets in wallets offered by cryptocurrency exchanges, which are actually controlled by these platforms, similar to bank deposits, but wallets directly controlled by users.
For example, when the relevant authorities establish a link between a debtor and a cryptocurrency wallet, that person may be given a choice – either share their keys or be penalized for hiding property in the form of digital assets.
In addition to preventing the outflow of capital through crypto, the bankers said their approach would help create a “closed loop in the circulation of cryptocurrencies” in Russia. According to the ABR, this would not be possible without an effective foreclosure mechanism for non-custodial cryptocurrencies.
In mid-April, ABR sent its regulatory concept to the Russian Central Bank, the Ministry of Finance and Russia’s financial regulator Rosfinmonitoring. Rosfinmonitoring told Izvestia that it was something to watch and the Treasury Department was ready to consider. Bank of Russia declined to comment.
At the same time, the idea has been criticized by lawmakers and crypto-industry representatives in the expert committee of the parliamentary task force tasked with developing comprehensive crypto regulations. Andrei Lugovoi, the group’s vice-chairman, said he understood ABR’s concerns, but warned that the move would hinder the legalization of the crypto market.
Experts interviewed by Izvestia are also skeptical. Identifying non-custodial wallets of ordinary citizens and confiscating them is unrealistic, if not impossible, said Roman Yankovsky, deputy dean of the Faculty of Law at the Higher School of Economics at a top Russian university.
Andrey Gusev, managing partner at law firm Nordic Star, believes there is no need for criminal liability for owning such wallets, saying tax benefits and administrative fines should be enough to deter Russian cryptocurrency holders from using or hiding them.
The criminalization of non-custodial wallets is “fundamentally wrong,” according to Maxim Bashkatov, head of the Legal Development Department at the Center for Strategic Studies. He pointed out that it is currently unsafe for Russians to store cryptocurrencies on exchanges because Western sanctions over the Ukraine war could lead to asset freezes.
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