Russian Finance Ministry Says Crypto Shouldn’t Be Legal Currency

key takeaways

The Russian Ministry of Finance has revealed details of proposed cryptocurrency law
The announcement comes as tensions between Russia and Ukraine mount

Cryptocurrencies should be not be given legal currency status and treated only as an investment vehicle, the Russian finance ministry said Monday.

The recommendation forms part of a draft cryptocurrency law the ministry presented to the Russian Parliament Feb. 18. The finance ministry’s proposal reinforces Russia’s current policy of not allowing cryptocurrencies to be used as a form of payment.

The bill focuses on defining regulatory requirements around exchanges. It also proposes that citizens looking to purchase and hold digital assets complete a screening process that would assess knowledge of the technology and associated investment risks.

The announcement mentions the ongoing controversy around cryptocurrencies in the country. The Bank of Russia — the country’s central bank — had proposed that all cryptocurrency mining, issuance and circulation should be banned in the country, the Ministry of Finance said.

“The proposals received from the Bank of Russia will be taken into account in further work on the draft law in so far as it does not contradict the approaches of the Russian Ministry of Finance,” the Ministry said in the release, which has been translated into English.

The move comes as growing concerns over conflict between Russia and Ukraine have put pressure on risk assets. Bitcoin and ether are down about 11% and 5% over the past week as fears over a war in Eastern Europe mount.

Analysts are confident though that the market can withstand the geopolitical forces at play as long as things do not escalate. It is a similar situation to the 2014 Russian invasion of the Crimean Peninsula, once part of the Ukraine, Tom Essaye, founder of Sevens Report Research, wrote in a recent note.

“Analysts believe that Russia may be setting up a precedent to invade Donbas [in eastern Ukraine] and annex part of the territory,” Essaye said. “Would that be a materially bearish event? No, not unless it created an all-out war between Ukraine and Russia (which is still unlikely).”

The announcement from the Ministry of Finance did not mention how the current situation in Russia — which is facing an increasingly harsh battery of economic sanctions from Western nations attempting to dissuade Putin from invading Russia — may impact the future of the crypto bill.

Some have suggested Russia will accelerate its development of a digital currency to help it mitigate the sanctions’ impact.

A full text of the bill has not yet been made public.

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