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Bank of Russia Proposes Regulating Taxation of Digital Assets, Exchange, Still Opposes Cryptocurrency

The Central Bank of Russia supports the development of digital financial assets but remains opposed to the legalization of cryptocurrency payments, its top management reiterated. The monetary authority is now working on a set of regulatory proposals that will be presented to parliament at the end of the year.

Central Bank of Russia Takes Legislative Initiative on Regulation of Digital Assets

The Central Bank of the Russian Federation (CBR) intends to present a legislative package on the regulation of digital financial assets (DFA) in the State Duma, the lower house of parliament. Under current Russian law, the term DFA refers to coins and tokens with an issuing entity, as opposed to cryptocurrencies like bitcoin.

Speaking during Finopolis, a forum dedicated to financial innovations, the bank’s vice president, Olga Skorobogatova, explained that the proposals pursue three main goals: improve taxation and eliminate tax arbitrage, develop exchange platforms, and regulate smart contracts.

The CBR executive highlighted the great interest in the development of DFA in Russia. “We think this is a very good new tool for financial market participants,” she said, quoted by cryptocurrency news site Forklog.

Skorobogatova revealed that the monetary authority is currently reviewing nine applications from companies seeking a license to issue and circulate digital financial assets. Three “information system operators” (Sberbank, Atomyze and Lighthouse) have already been authorized to do this, she noted.

The Bank of Russia maintains its opposition to the legalization of cryptocurrency deals

Meanwhile, speaking in the Duma, CBR Governor Elvira Nabiullina stated that while the Bank of Russia supports the development of digital financial assets, it is against the use of private cryptocurrencies in deals. Quoted by the Tass news outlet, she also insisted that digital financial assets are not just limited to cryptocurrencies and emphasized:

We have not changed our position that private cryptocurrencies, for which it is unclear who and how is responsible, which are opaque and carry high volatility risks, should not be used in liquidations.

Discussions about the state of cryptocurrencies and the regulation of the cryptocurrency market in Russia have been ongoing for more than a year. The CBR has traditionally maintained a strict stance, proposing a blanket ban on related activities such as mining and trading in January.

However, sanctions over the war in Ukraine, including restrictions on international payments, have softened his stance. In September, the monetary authority agreed with the Ministry of Finance that, under current conditions, it would be impossible for Russia to dispense with cross-border cryptocurrency deals.

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The Bank of Russia allows Sberbank to issue digital financial assets

Sberbank, the largest bank in Russia, has been authorized by the country’s monetary policy regulator to issue digital financial assets. The move comes amid tightening Western sanctions over the Ukraine war, including limiting Moscow’s access to the world financial market.

Sberbank added to the Register of Issuers of Crypto Assets of the Central Bank

The Central Bank of Russia (CBR) added Sberbank, the country’s leading banking institution, to its register of information system operators authorized to issue digital financial assets (DFA). The term is used to describe various types of cryptocurrencies in the current legislation of the country. On Thursday, the commercial bank confirmed the news and elaborated:

The accounting and circulation of the DFA issued on the Sber digital assets platform will be carried out in an information system created from a distributed ledger using blockchain technology, which guarantees data security and the impossibility of replacing information.

The largest state-owned banking and financial services company detailed that other legal entities will be able to issue their own digital assets certifying monetary claims to attract investments. Companies will also acquire DFAs issued on the Sberbank platform and conduct other transactions with them in accordance with applicable regulations.

The “On Digital Financial Assets” law, which came into force in January 2021, regulated various activities related to cryptocurrencies, including the issuance of digital currencies and the raising of funds through tokens. However, it did not introduce rules for other major cryptocurrency operations such as mining, trading, and circulation in the Russian economy.

A working group in the State Duma, the lower house of parliament, has been preparing proposals to address the regulatory loopholes. In February, the Ministry of Finance introduced a new draft law “On Digital Currency” that aims to legalize investments in cryptocurrencies, but at the same time consolidate the ban on the use of cryptocurrencies for payments in Russia.

Amid mounting sanctions over the invasion of Ukraine, including in the financial realm, concerns have been raised in the West that the Russian government and sanctioned individuals may turn to crypto assets as a tool to circumvent restrictions.

Recent statements by a member of the regulatory working group in Moscow confirmed Russia’s interest in employing digital currencies to restore its access to global finance. Russian authorities are now proceeding with efforts to legalize the country’s crypto space.