New legislation adopted by the Russian parliament this week legalizes cryptocurrencies and crypto mining within the country’s borders. The laws establish a regulatory framework that empowers the government to exert more control over digital assets and the industry built around them.
Russia has had an ambiguous stance on cryptocurrencies for years. While authorities frowned upon their decentralized and anonymous nature, the country has sought to utilize the benefits of blockchain technology. The new legislation reflects this dichotomy by recognizing cryptocurrencies as property that can be legally traded, while also expanding the government’s oversight over the nascent market.
The laws prohibit the use of crypto for payments but allow trading and mining. Cryptocurrency exchanges and miners will have to register with the government and comply with anti-money laundering regulations. The country’s tax code will also apply to crypto, with digital assets being subject to a 13% capital gains tax.
While the regulations aim to legitimize cryptocurrencies and blockchain ventures, they also strengthen the government’s grip over the industry. Some analysts argue that Russia seeks to emulate China’s model of exerting substantial control over the digital economy. The new crypto laws may be a step towards developing a digital ruble and integrating it into the BRICS payment system that Russia and China have been championing.
Yet others claim that the regulations will hamper innovation and push crypto activity into the shadows. The restrictions on using cryptocurrencies for payments may obstruct their mainstream adoption. The requirement for exchanges and miners to identify users and report suspicious activity can dissuade many from entering the space. The tax obligations may also prove too onerous for smaller players.
The new legislation highlights the complex relationship between governments and decentralized digital currencies. While regulators worldwide grapple with balancing oversight and innovation, Russian authorities have taken a step towards establishing clear-cut rules for the industry. The coming months will show whether the new laws will help crypto flourish in Russia or drive it further underground.
