Russian Central Bank Puts Its Foot Down On Crypto-Currency

Russia’s Central Bank wary of crypto-currency. But authorities moving ahead with developing this part of the fintech market in Russia. (Shutterstock)

Although the National Settlement Depository (NSD) of the Moscow Stock Exchange is working on building the infrastructure to allow for bitcoin and other digital currency trading on the exchange someday, Russia’s central bankers still think it’s a bad idea.

The Bank of Russia said Monday that crypto-currencies and its derivatives (think options contracts for bitcoin) should not be admitted for trading in Russia anytime soon.

"Crypto-currencies are issued by an unlimited circle of anonymous entities. Due to the anonymous nature of the issuance of crypto-currency, citizens and legal entities can be involved in illegal activities, including legalization (laundering) of proceeds from crime and financing of terrorism," the RCB said in a statement. "Given the high risks of circulation and use of crypto-currency, the Bank of Russia considers it premature to admit crypto-currencies, as well as any financial instruments nominated or associated with crypto-currencies, to circulation and use at organized trades and in clearing and settlement infrastructure on the territory of the Russian Federation for servicing transactions with crypto-currencies and derivative financial instruments on them," the Sept. 4 statement read.

Russia’s parliament is currently debating how to regulate crypto-currencies, with a draft law expected to be passed this fall. Russian presidential press secretary Dmitry Peskov told Tass newswire that crypto-currency legality is the responsibility of the government. "These topics are subject to interdepartmental discussion; this is a new phenomenon in our life," he reportedly said.

See: Moscow Stock Exchange Welcomes Crypto-Currency — Forbes

Russia Opens First Criminal Case Involving Bitcoin — Forbes

China Bans Start-Ups From Raising Cash In ICO Market — CNBC

Russia’s Central Bank knows what it is dealing with. Russian Alexander Vinnik is escorted by police officers as he arrives at a courthouse in Greece on July 26, 2017. Greek police said Vinnik was sought by U.S. law enforcement for allegedly helping criminals launder billions of dollars using Bitcoin. Police said Vinnik headed a organization that has supposedly laundered at least $4 billion dollars in bitcoin since 2011. / AFP PHOTO / Getty Images/SAKIS MITROLIDIS

The Moscow Exchange’s settlement depository said it was developing a blockchain platform to provide deposit and settlement services for digital assets. The platform is being built in partnership with Waves, a public blockchain project designed by Russian physicist and local crypto-currency expert Sasha Ivanov in Moscow.

The platform would enable the Exchange to issue a crypto-currency and "crypto-currency wallet" for banks, pension funds and retail investors, one which would also enable the exchange of those assets for paper currencies. This is supposedly slated to launch early next year, as rules and regulations have not yet been figured out.

Eddie Astanin, chairman of the executive board at NSD, said in a statement that their goal was to create a secure and user-friendly accounting infrastructure for digital assets.

"The platform will not only provide technological and legal protection of all parties involved, but will increase the variety of post-trade services for investors, custodians and new institutions emerging in this sector of the economy," Astanin said. The goal is to make crypto-currency a legit tradable asset like any other currency.

Bitcoin has risen over 720% in the last 12 months . It’s meteoric rise has become impossible to ignore. Shark Tank investor Mark Cuban is throwing his money at the trend. Coinbases Global Digital Asset Exchange in the U.S. also allows for crypto-coin trading by anyone, with around $200 million traded daily and facing SEC rules to protect investors from this new bitcoin bubble.

A number of Russians are working on building the blockchain technologies that support digital currency projects in the country. The Central Bank may be right in that crypto-currency is a gambling den, but at one point it will have to be regulated to protect the gamblers from themselves, and local investors of all sizes who may lose their shirts investing in digital money. Something’s got to give. And for the most part, the Russians are moving in the direction of allowing for greater development and professionalism in fintech.

The Voskhod trading platform, named after the Soviet-era spacecraft that took man into outer space, is funded by the Far East Development Fund, a state run development bank. It was the first in Russian start-up to receive the right from the Central Bank to work with crypto-currencies.

"We are considering the possibility of creating a platform for trading with crypto-currencies, Deputy Prime Minister Yury Trutnev said in an interview with TASS. "The central bank has supported us."

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