Russia’s Ministry of Finance is proposing legislation to restrict the circulation of cryptocurrencies, according to Russian news outlet Izvestia. The Ministry wants to amend the Digital Financial Assets (DFA) Law, which was passed in July and comes into effect next January.
The DFA Law focused more on enabling digital securities and tokens but also defined digital currencies such as Bitcoin and Ether. At the time, it was expected a separate federal law would regulate the circulation of cryptocurrencies. But it appears the Ministry believes this route will be quicker.
While it seemed for a while that Russia was not going to outright ban cryptocurrencies, this newest proposal involves substantial restrictions. The Ministry of Finance’s proposed amendment to the federal law will make cryptocurrency miners unable to receive payment in the form of cryptocurrencies. However, producing crypto assets will still be permitted, which means miners who are part of a pool could receive fiat currency payment.
Additionally, an ‘outright’ ban on all virtual money transactions is proposed. Citizens who illegally circulate and transact with digital money may face a fine up to 100,000 rubles ($1,324) or seven years in prison. In contrast, legal entities may face a penalty of up to 1 million ($13,240).
However, there are three exceptions: inheritance, bankruptcy, and enforcement proceedings.
Legally, there appears to be considerable confusion amongst lawyers and even other Ministries. The Ministry of Economic Development raised concerns over the potential loss to Russia’s economy with transactions pushed offshore. In another example, digital reward point solutions could be included. Hence, revisions to the draft legislation are expected.
India also attempted to restrict the circulation of cryptocurrencies, but without passing legislation. Instead, the central bank imposed restrictions, which meant cryptocurrency exchanges couldn’t use bank accounts. The Supreme Court overturned the central bank’s ban and exchanges started to trade. However, it’s still expected that legislation will be enacted.