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Russia To Recognize Bitcoin & Crypto as Form of Payment, Legislation to be Drawn on Feb 18th

The draft legislation, which is expected to regulate crypto as a form of payment, shall be drawn up no later than Feb. 18th.

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Photo by Don Fontijn on Unsplash

The Russian Government and its Central Bank have come to an agreement to draft legislation or amend the existing laws that would recognize crypto as a form of currency, as per a statement made on Tuesday.

This is a major reversal as it comes after the Bank of Russia proposed the banning of miners and various other crypto operations just last month due to arising concerns surrounding the fact that they could endanger the country’s financial system.

Kommersant, a news outlet was the first to report the announcement on Tuesday. Cryptos are to be classified as an “analogue of currencies”, or so it is understood, and not in fact, as financial digital assets. As for the legislation, it shall reportedly be drawn up no later than February 18th.

Russia’s regulation aims to regulate a mechanism for the digital currencies’ circulation into the financial system of the country while making sure they maintain control over the credit institutions’ cash flows, reads a rough translation of the accompanying draft document.

“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.”

Regarding the usage of crypto, it shall only be possible by way of following thorough and proper identity checks via the banking system of the country or licensed intermediaries, whereas operations over R 600,000 ($8,016) are required to be declared, per the document.

It would be considered a criminal offense to hold transactions outside of the proposed legal parameters, which would result in fines that are to be introduced pertaining to the illicit acceptance of cryptos as a means of payment.

Officials also stated that the protection of citizen rights has been ensured by the regulation, under the licensing regime that’s aimed towards cryptocurrency providers. They shall need to have “financial airbags” so to speak, in terms of liquidity and adequate 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,” reads the document.

Furthermore, there are plans to introduce an “obligation” for market participants to educate the citizens of Russia about the risks involved in and associated with digital assets.

Various Russian Regulators and lawmakers, also including the Ministry of Finance, the Federal Security Service, the Ministry of Internal Affairs, the Federal Tax Service, and various others were also involved in the process of making the decision.

The statement reads “The implementation of the concept will ensure the creation of the necessary regulatory framework, will bring the digital currency industry out of the shadows and create the possibility of legal business activities.”

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