James Cirrone

Russian President Vladimir Putin has signed a bill that will introduce a digital version of the ruble, after <a href="https://blockworks.co/news/russian-duma-greenlights-digital-ruble">the effort was initially sanctioned by the Duma</a> on July 11, 2023.



Putin quite literally gave the law his stamp of approval on Monday, which now makes Russia the largest nation in the world to implement a central bank digital currency (CBDC).



The CBDC pilot will go into effect on Aug. 1, 2023, which comes a little under three years after the Russian government first published a consultation <a href="http://www.cbr.ru/StaticHtml/File/113008/Consultation_Paper_201013_eng.pdf">paper</a> on the <a href="https://blockworks.co/tag/ruble">digital ruble</a> in October 2020.&nbsp;



Elvira Nabiullina, the governor of Bank of Russia, said in a <a href="https://ria.ru/20230721/rubl-1885538360.html">statement</a> that citizens would not be forced to use the CBDC and that it will serve as an additional currency.



The Bank of Russia will operate and maintain the necessary infrastructure to get a CBDC up and running, according to the text of the <a href="http://publication.pravo.gov.ru/document/0001202307240009?index=1">law</a>.



Russia is joining 21 other nations that have launched pilot programs for CBDCs, according to the Atlantic Council CBDC <a href="https://www.atlanticcouncil.org/cbdctracker/">tracker</a>. Once the digital ruble officially launches past the beta, Russia will join a collection of 11 other nations that have actually instituted a CBDC — including Nigeria and a smattering of countries in the Caribbean.&nbsp;



Russia’s move toward digital currencies comes at a moment when global government interest in CBDCs is at an all-time high. A 2022 Bank of International Settlements survey found that <a href="https://blockworks.co/news/banks-exploring-potential-cbdc">93% of central banks have shown interest in exploring a CBDC</a>.



Meanwhile in the US, England and Singapore, <a href="https://blockworks.co/news/cbdc-jobs-multiply">jobs having to do with CBDCs are exploding</a>. Branches of the Federal Reserve in San Francisco, Boston, and Cleveland are all hiring CBDC architects, Blockworks reported Monday.



While the US hasn’t announced an official CBDC pilot, <a href="https://blockworks.co/news/banks-pen-paper-cbdc-implementation">the Fed joined up with numerous central banks to pen a paper on the topic</a> in May.



It remains to be seen how Russia’s CBDC will fare, but Nigeria — the next biggest nation to have launched one for its citizens — <a href="https://blockworks.co/news/nigeria-cbdc-push-limits-cash-withdrawals">has run into major issues with its implementation</a>.



Molly Jane Zuckerman contributed reporting.



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Putin says ‘yes’ to Russia’s digital ruble

Bessie Liu

<div id="highlights-block_62d1da8f239aa" class="highlights">
 <ul>
 <li>Previous cryptocurrency regulation was “not enough,” according to Russian legislators</li>
 <li>The amended law will prevent workarounds of existing crypto payment restrictions</li>
 </ul>
 
</div>



Russian President Vladimir Putin signed a bill on Thursday amending the country’s existing ban on cryptocurrency payments to specify additional types of tokens.



The amendment — submitted by ​​Anatoly Aksakov, a member of the Russian State Duma, on June 7 — will prohibit the use of any security tokens, utility tokens and non-fungible tokens (NFTs) as forms of payment for goods and services in the country.



According to Russian media group RBC, group legislators decided that the existing ban — which has been active since January 2021 — was not enough, as it only prevented individuals and entities from using “payment tokens.”&nbsp;



The amended law aims to prevent workarounds of existing crypto payment restrictions.



Following strict sanctions imposed on Russia following its invasion of Ukraine, <a href="https://www.reuters.com/article/ukraine-crisis-russia-cryptocurrency/russias-central-bank-sees-space-for-crypto-in-international-trade-idUSR4N2X3018" target="_blank" rel="noreferrer noopener">Reuters reported</a> in May that Russia’s central bank had plans to allow the use of cryptocurrencies for international payments within the context of global trade.&nbsp;



Major exchanges have complied with US sanctions, freezing accounts of sanctioned users. Most recently, Binance <a href="https://cms.blockworks.co/binance-blocks-newly-sanctioned-russians-launches-card-for-ukrainian-refugees/" target="_blank" rel="noreferrer noopener">closed the accounts</a> of a handful of individuals with family ties to top Russian officials.



Russia is also working on system improvements to identify participants of blockchain transactions, <a href="https://www.reuters.com/technology/russia-improve-crypto-transaction-monitoring-regulation-draws-closer-2022-07-08/" target="_blank" rel="noreferrer noopener">according to Reuters</a>. Blockchains such as Bitcoin record transactions on a transparent, immutable ledger, but the individual identities of wallet holders are pseudonymous, making it difficult to monitor.&nbsp;



While Moscow has been open to regulating digital assets, the Bank of Russia has previously floated a total ban on trading and mining, citing financial stability concerns. The central bank <a href="https://www.reuters.com/article/ukraine-crisis-russia-cryptocurrency/russias-central-bank-sees-space-for-crypto-in-international-trade-idUSR4N2X3018" target="_blank" rel="noreferrer noopener">reportedly</a> claimed in May that crypto’s threat to the country’s finances had decreased, as Russian banks had enough foreign currency moving forward.



In any case, Putin’s new amendment suggests there are no plans for the country to relax its digital currency regulations — at least for now.



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Putin Amends Law To Broaden Russia’s Crypto Payments Ban

Sebastian Sinclair

<div id="highlights-block_621edb3f6c7cb" class="highlights">
 <ul>
 <li>The gaming and metaverse giant said it wanted to avoid being &#8220;financially excluded&#8221; for fear of being associated with a sanctioned country</li>
 <li>It is unclear whether the company will block purchases of SAND, the utility token used within a metaverse produced by The Sandbox, Animoca&#8217;s subsidiary</li>
 </ul>
 
</div>



Blockchain and metaverse gaming giant Animoca Brands decidedly cut ties with its Russian users on Tuesday, citing sanctions by Western powers over the Ukrainian invasion as justification.



According to a <a href="https://www.bloomberg.com/news/articles/2022-03-01/animoca-breaks-with-crypto-peers-by-cutting-off-russian-users#:~:text=Animoca%20Brands%20Corp.%20Ltd%2C%20one,to%20the%20invasion%20of%20Ukraine." target="_blank" rel="noreferrer noopener">report by Bloomberg</a>, Animoca will no longer provide its services to customers belonging to the former Soviet power by blocking users and restricting access to its shares.



The move comes as Ukraine’s vice prime minister and minister of digital transformation, Mykhailo Fedorov, urged cryptocurrency exchanges in a&nbsp;<a href="https://twitter.com/FedorovMykhailo/status/1497922588491792386?s=20&amp;t=vpx6bGwfVpJ0KnBJkpRXvg" target="_blank" rel="noreferrer noopener">tweet</a>&nbsp;Sunday morning to block addresses belonging to Russian users.



Crypto businesses have been <a href="https://cms.blockworks.co/crypto-exchanges-weigh-blocking-russian-accounts-as-sanctions-intensify/" target="_blank" rel="noreferrer noopener">weighing up</a> a decision to follow through on the minister&#8217;s request, though most have reportedly <a href="https://www.cnbc.com/2022/02/28/binance-will-not-block-russian-accounts-after-ukraine-request.html" target="_blank" rel="noreferrer noopener">decided not to pursue</a> such measures. Animoca, by contrast, has become one of the few in the industry to comply.



It is unclear whether the company will attempt to block purchases of SAND, the utility token used within a metaverse produced by Animoca&#8217;s subsidiary The Sandbox. Animoca did not immediately respond to Blockworks&#8217; request for comment.



On Feb. 24, Russian troops were ordered to cross into Ukrainian territory by President Vladimir Putin following weeks of US intelligence warnings. The invasion was swiftly condemned by most of the Western world which also moved to sanction major Russian banks, oligarchs and businesses. 



Sanctions extended to Russian financial institutions&#8217; use of the SWIFT interbank settlement system, hindering their ability to operate effectively within the global financial system. 



In an interview with Bloomberg and cited in the report, Animoca co-founder Yat Siu said the company&#8217;s decision would likely affect subsidiaries such as Gamee and blockchain fitness company Lympo, although — given the low population of Russian users — it was unlikely the impact will be substantial.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“The legal advice we’ve been receiving is we now have to impose some restrictions,” said Siu. “It’s a sanctioned country on par with North Korea. The moment we end up doing business in those areas, we might ourselves become financially excluded from the financial system.”</blockquote>



Hong Kong-based Animoca was founded in 2011 with a focus on developing and publishing mobile games and applications. The company, which has since branched out to blockchain and artificial intelligence, has raised a total of $627.7 million in funding, according to data provider <a href="https://my.pitchbook.com/profile/65039-59/company/profile#deal-history/186770-35T" target="_blank" rel="noreferrer noopener">Pitchbook</a>.



The company received $358.89 million of development capital in January via Liberty City Ventures, Delta Blockchain Fund and 10T Holdings, among others, boosting the company&#8217;s pre-money valuation to $5.44 billion.



That, in turn, had doubled from a $267.8 million private equity deal in October where Animoca was valued at $2.2 billion.



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Blockchain Gaming Giant Animoca Brands Halts Services to Russian Users

Casey Wagner

<div id="highlights-block_6219462952b2b" class="highlights">
 <ul>
 <li>The current sanctions target Russian banks, technology companies and aerospace operators</li>
 <li>Russia has recently moved to regulate cryptocurrencies, which industry participants say is no coincidence</li>
 </ul>
 
</div>



Following a fresh round of sanctions aimed at isolating Russian banks from the global financial system, experts are eyeing cryptocurrencies as a means to bypass the blacklist.



The US- and European-imposed measures target Russian banks, technology companies and aerospace operators — a wide swath of the country’s economy — following an escalation of Russian President Vladimir Putin’s unprovoked invasion of Ukraine.



Leah Wald, CEO of crypto asset manager Valkyrie Investments, said it is uncertain whether Russia would use crypto to circumvent sanctions, but “the likelihood they could make such a pivot is very high.”



It’s worth keeping in mind that using digital assets instead of US dollars is likely a violation of the sanctions, legal experts say.



The primary sanctions overseer in the US, the Office of Foreign Assets Control (OFAC), “takes the view that its sanctions apply to activity conducted in cryptocurrency,” according to Evan Abrams, an attorney at Steptoe &amp; Johnson who specializes in sanctions.



“They generally would view a transaction conducted in bitcoin or another asset the same as they would view a transaction conducted in dollars,” Abrams said.



US-based cryptocurrency exchanges and wallet providers must follow the same reporting and know-your-customer (KYC) regulations as banks, but decentralized exchanges and marketplaces in other countries may offer a workaround.



“As long as they don&#8217;t use a US-regulated entity to purchase and move the crypto, I don&#8217;t think that it would be difficult [to avoid sanctions],” said David Tawil, president of crypto hedge fund firm ProChain Capital.



Employing a number of different exchanges would also make it easier for Russian financiers to cover their tracks, according to Wald, a former World Bank analyst.



“Russian companies could quite easily use Russia-based exchanges or brokers as fiat on-ramps, and then transact in crypto across multiple decentralized exchanges or through other tools meant to conceal the source of funds,” Wald said. “Then, entities willing to engage with them could potentially transact without facing any real consequences.”



The punitive measures come shortly after Russia’s finance ministry <a href="https://cms.blockworks.co/russian-finance-ministry-says-crypto-shouldnt-be-legal-currency/" target="_blank" rel="noreferrer noopener">moved ahead</a> with its cryptocurrency regulatory plans — which double down on the country’s standing policy of banning crypto as a form of payment, a potential challenge to businesses looking to dodge sanctions. 



Russia’s central bank digital currency, the under-development digital ruble, could allow companies to legally trade without the dollar in a state-sanctioned workaround.&nbsp;



“It is likely no coincidence that Russia moved recently to legalize cryptocurrencies in a bid to standardize their regulation and usage, perhaps as a proactive measure to combat any potential sanctions that would arise from an invasion of Ukraine,” Wald said.&nbsp;



In October, OFAC released <a href="https://home.treasury.gov/system/files/126/virtual_currency_guidance_brochure.pdf" target="_blank" rel="noreferrer noopener">new guidance</a> on cryptocurrency and sanction compliance, highlighting, in the agency’s eyes, the increasing threat blockchain technology poses to central control points of governments. 



Penalties for breaking OFAC sanctions without permission can result in a fine of up to $20 million and a prison sentence of up to 30 years.&nbsp;



The severity, Abrams said, depends on whether the violations are against primary or secondary US sanctions. The former requires a US citizen or resident in the mix.&nbsp;



When it comes to secondary sanctions, where non-US citizens operate in other countries, OFAC has little legal standing to pursue civil or criminal penalties, according to Abrams.



“But what they can do is to essentially impose sanctions on those actors,” he said. “If one person is interacting with the sanctioned individual, the first person can be sanctioned in a similar manner to the person that they&#8217;re interacting with.”



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Russian Financiers Could Turn To Crypto To Sidestep US, European Sanctions

<div id="highlights-block_6217134ec1f94" class="highlights">
 <ul>
 <li>Putin warns other countries: Meddling with Russian affairs will lead to &#8220;consequences they have never seen&#8221;</li>
 <li>While crypto and stocks drop, gold is up 2.6% on the day and WTI Crude Oil is up 7.3%, trading at $99 a barrel</li>
 </ul>
 
</div>



The price of the world&#8217;s largest cryptocurrency by market value fell beneath the $35,000 psychological support line late Wednesday evening amid Russian President Vladimir Putin&#8217;s calls for a military campaign inside Ukraine.



Bitcoin fell almost 9% over a 24-hour period, according to <a href="https://cms.blockworks.co/prices/" target="_blank" rel="noreferrer noopener">Blockworks</a>. Many leading digital assets are trading at their lowest levels since Jan. 24.



Putin, appearing on live television at around 10:00 pm ET, said he had ordered the Russian military to move in on Ukraine&#8217;s Donbas region. Reporters in the&nbsp;Ukrainian&nbsp;capital, Kyiv, and the Black Sea port city of Odessa also <a href="https://www.abc.net.au/news/2022-02-24/vladimir-putin-launches-invasion-of-ukraine/100857650" target="_blank" rel="noreferrer noopener">observed explosions</a>.



Russia declared Wednesday the Ukrainian territories of Donetsk and Luhansk of the Donbas region as independent amid strong condemnation from Western powers. Putin said the decision to move into those areas comes as a response to threats posed by Ukraine.



The Russian president warned other countries that any attempt to meddle with Russia&#8217;s affairs would lead to &#8220;consequences they have never seen,&#8221; ABC News reported.



Shortly before Putin began his address, bitcoin&#8217;s price began to tumble below $36,600 and continued falling to a low of $34,322, exchange data shows. A flood of seller volume on the hourly chart can be seen tracking its descent, with little resistance coming from bitcoin buy action.



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="835" height="565" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Screenshot-2022-02-24-at-11.11.03.png" alt="Bitcoin chart" class="wp-image-17879" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Screenshot-2022-02-24-at-11.11.03.png?w=835 835w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Screenshot-2022-02-24-at-11.11.03.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Screenshot-2022-02-24-at-11.11.03.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Screenshot-2022-02-24-at-11.11.03.png?w=380 380w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Screenshot-2022-02-24-at-11.11.03.png?w=386 386w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Screenshot-2022-02-24-at-11.11.03.png?w=324 324w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Screenshot-2022-02-24-at-11.11.03.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/Screenshot-2022-02-24-at-11.11.03.png?w=50 50w" sizes="(max-width: 835px) 100vw, 835px" /><figcaption>Putin&#8217;s remarks came at 10:00 pm ET or 3:00 UTC.</figcaption></figure>



Earlier on Wednesday, Pentagon spokesperson John Kirby&nbsp;<a href="https://www.youtube.com/watch?v=CGJFRcYhFXk" target="_blank" rel="noreferrer noopener">said</a>&nbsp;Russian forces were continuing to amass along Ukraine&#8217;s borders and were putting themselves &#8220;in an <a href="https://cms.blockworks.co/market-wrap-s-and-p-drops-to-lowest-since-june-2021-while-crypto-extends-losses/" target="_blank" rel="noreferrer noopener">advanced stage</a> of readiness to act and to conduct military action.&#8221;



A sell-off among stocks and crypto was seen Wednesday, extending the trend in lower prices as the S&amp;P 500 and Nasdaq closed -1.84% and -2.6% respectively.



Ukraine&#8217;s foreign affairs minister tweeted Thursday that Putin had launched a &#8220;full-scale&#8221; invasion against his country and that cities within the region were &#8220;under strikes.&#8221;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Putin has just launched a full-scale invasion of Ukraine. Peaceful Ukrainian cities are under strikes. This is a war of aggression. Ukraine will defend itself and will win. The world can and must stop Putin. The time to act is now.&mdash; Dmytro Kuleba (@DmytroKuleba) <a href="https://twitter.com/DmytroKuleba/status/1496695889401896964?ref_src=twsrc%5Etfw">February 24, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Investors have continued to closely monitor developments in Ukraine, with both traditional and digital asset markets responding sharply. Eyes are now fixed on the US and its allies, awaiting their response to the mounting crisis.



Gold continues to hold water and is up 2.6% on the day — above $1,950 per troy ounce — while WTI Crude Oil is up 7.3% and trading at $99 a barrel. Meanwhile, crypto assets are floating around in a sea of red with Cardano, Avalanche, Polygon and Dogecoin taking the hardest hits in the top 20 by market value, down between -15% and -17% on the day.



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Bitcoin Slides Below $35K Amid Putin’s Call for ‘Full-Scale Invasion’ of Ukraine

<div id="highlights-block_6213cb3ddc828" class="highlights">
 <ul>
 <li>The Russian Ministry of Finance has revealed details of proposed cryptocurrency law</li>
 <li>The announcement comes as tensions between Russia and Ukraine mount</li>
 </ul>
 
</div>



Cryptocurrencies should be not be given legal currency status and treated only as an investment vehicle, the Russian finance ministry <a href="https://minfin.gov.ru/ru/press-center/?id_4=37774-minfin_rossii_napravil_v_pravitelstvo_rossii_proekt_federalnogo_zakona_o_tsifrovoi_valyute" target="_blank" rel="noreferrer noopener">said</a> Monday.



The recommendation forms part of a draft cryptocurrency law the ministry presented to the Russian Parliament Feb. 18. The finance ministry&#8217;s proposal reinforces Russia&#8217;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 <a href="https://cms.blockworks.co/as-russia-tests-digital-ruble-plans-for-broader-crypto-regulation-are-uncertain/" target="_blank" rel="noreferrer noopener">controversy</a> 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.&nbsp;



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 <a href="https://cms.blockworks.co/as-russia-tests-digital-ruble-plans-for-broader-crypto-regulation-are-uncertain/" target="_blank" rel="noreferrer noopener">accelerate its development</a> 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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Russian Finance Ministry Says Crypto Shouldn’t Be Legal Currency

Ben Strack

<div id="highlights-block_6210035252a70" class="highlights">
 <ul>
 <li>Russia’s Ministry of Finance has reportedly begun accepting public comments on rules around digital asset transactions</li>
 <li>The Bank of Russia completed the prototype of its digital ruble platform in December, and 12 banks agreed to test the platform</li>
 </ul>
 
</div>



As Russia mulls rolling out a state-sponsored digital ruble, crypto regulations more broadly remain up in the air amid clashes between the country’s central bank and finance ministry.&nbsp;



A crypto bill appears to still be in the works, and Russia’s Ministry of Finance has <a href="https://regulation.gov.ru/projects#npa=125083" target="_blank" rel="noreferrer noopener">signaled</a> that it is seeking public comments until March 18 on rules around digital asset transactions.&nbsp;



Nick du Cros, head of compliance and regulatory affairs at digital asset manager CoinShares, called the potential of a bill this year “a significant positive development.”



“The central bank doesn&#8217;t hold the pen on the draft legislation, so it will need to lobby very hard for the legislation to reflect its point of view,” du Cros told Blockworks. “As it looks now, the central bank&#8217;s view that there should be an outright ban on crypto and crypto mining looks less likely than Russian-centric regulation which allows crypto to exist with the current banking network.”



Russian Finance Minister Anton Siluanov said Friday that he hopes such a bill passes before the end of the year, <a href="https://www.reuters.com/article/idUSR4N2UR004" target="_blank" rel="noreferrer noopener">according to Reuters</a>.



The Russian government and central bank last week <a href="https://cms.blockworks.co/russias-move-to-regulate-cryptocurrency-puts-other-countries-on-notice/" target="_blank" rel="noreferrer noopener">reached an agreement</a> to draft legislation or amend existing laws recognizing crypto as currency. News outlet <a href="https://www.kommersant.ru/doc/5206307" target="_blank" rel="noreferrer noopener">Kommersant reported</a> that legislation would be drawn up by Feb. 18.



Bloomberg News <a href="https://www.bloomberg.com/news/articles/2022-02-15/nabiullina-digs-heels-in-over-russian-plan-to-legalize-crypto" target="_blank" rel="noreferrer noopener">reported</a> that government officials at the Bank of Russia and the Ministry of Finance did not reach an agreement on the best path forward on Tuesday.&nbsp;



The central bank had previously <a href="https://cms.blockworks.co/proposed-russian-crypto-ban-may-push-miners-west/" target="_blank" rel="noreferrer noopener">proposed to restrict miners</a> and crypto trading over concerns that they could endanger the country’s financial system. President Vladimir Putin has said he supports a plan to tax and regulate the space.



The Bank of Russia, meanwhile, launched a prototype of its digital ruble platform in December, with 12 banks agreeing to test it. Three banks have connected to the platform, the bank said Tuesday, with two completing digital ruble transactions between clients via mobile applications.



Focusing first on the digital ruble before opening up the system to other currencies could give the country a leg-up in the market, Stan Miroshnik, partner at growth equity fund 10T, told Blockworks.



Noting a parallel to China’s <a href="https://cms.blockworks.co/china-debuts-digital-yuan-at-winter-olympics-amid-warnings-from-us-senator/" target="_blank" rel="noreferrer noopener">digital yuan</a>, Miroshnik said the state-sponsored cryptocurrency helped phase out other speculative digital assets.



“To the extent you want to create your own dominant digital asset that the central bank has control of…I think that’s the playbook,” Miroshnik said. “I think that’s the tension we’re seeing playing out.”



The latest draft legislation has been published while the G-20 Finance Ministers and Central Bank Governor Meeting takes place, du Cros said, adding that the timing indicates Russia is more interested in “bespoke” regulations over international crypto standards.



The Bank of Russia and Ministry of Finance did not immediately return a request for comment.



<a href="https://cms.blockworks.co/ukraine-passes-law-legalizing-crypto-as-threat-of-war-looms/">Ukraine passed amendments to its law</a> on digital assets to ratify the eventual creation of a legal market for cryptocurrencies as the threat of an invasion by Russia looms.



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As Russia Tests Digital Ruble, Plans for Broader Crypto Regulation Are Uncertain

<div id="highlights-block_62042cf927e76" class="highlights">
 <ul>
 <li>Russia’s central bank and President Vladimir Putin will have to reconcile their divergent views on digital assets</li>
 <li>The country accounts for 11% of the world’s bitcoin mining, giving lawmakers a large incentive to properly regulate the industry</li>
 </ul>
 
</div>



Russia’s “unsurprising” move to regulate cryptocurrency is expected to spur other countries to follow suit, according to industry participants.



Following a <a href="http://static.government.ru/media/files/Dik7wBqAubc34ed649ql2Kg6HuTANrqZ.pdf" target="_blank" rel="noreferrer noopener">framework</a> drawn up by <a href="https://cms.blockworks.co/russia-moves-to-recognize-crypto-as-a-form-of-currency/" target="_blank" rel="noreferrer noopener">Russia’s government and central bank</a>, policymakers are expected to draft fresh legislation or amend existing laws to oversee crypto as a currency. The measures, according to Russia, will stabilize any broader economic impacts from digital assets.



Anto Paroian, chief operating officer at digital assets investment fund ARK36, said Russia’s response to the rise of crypto reflects a broader shift in nations conceding the technology is here to stay.&nbsp;



“Overall, authorities [are starting to] recognize that crypto is becoming such an entrenched part of how people think about and deal with money in the digital age that the political and economic cost of banning it appears to be far greater than the risk involved in allowing it to coexist with the legacy financial systems,” Paroian told Blockworks via email.



Time is of the essence before international bodies start to influence policy, according to Nick du Cros, head of compliance and regulatory affairs at CoinShares.



“These proposals will likely send the message that countries should enact local regulations quickly and not wait for the [Group of Seven] to set international standards,” du Cros said, referring to the political forum made up of Canada, France, Germany, Italy, Japan, the UK and the US.



Anthony Pompliano, founder of Pomp Investments, wrote in a Wednesday newsletter that Russia turning a “sympathetic” ear to crypto — including putting digital assets on its balance sheet — would “force the hand of the United States.”



“There is a global competition underway that has a decentralized, open system at the heart of it; anyone can plug into the system,” Pompliano wrote. “The game theory is that no one wants to start the cascade, but once your adversary does it, you are forced to adopt the technology or risk being left behind.”



The US, at any rate, will be closely watching developments in Russia, which is set to draw up legislation by Feb. 18, including standards for taxing crypto.&nbsp;



The measures come after Russia’s central bank last month <a href="https://www.cbr.ru/Content/Document/File/132242/Consultation_Paper_20012022_eng.pdf" target="_blank" rel="noreferrer noopener">proposed</a> restricting the circulation and exchange of cryptocurrencies, banning crypto investments by financial institutions and prohibiting crypto mining.



Since, Russian President Vladimir Putin said he supports a plan to tax and regulate mining, referring to “competitive advantages” Russia could gain from crypto mining.



Members of the US Congress, meanwhile, <a href="https://cms.blockworks.co/crypto-industry-will-move-offshore-if-congress-doesnt-act-executives-warn/" target="_blank" rel="noreferrer noopener">have held hearings</a> on crypto in recent months, and industry watchers <a href="https://cms.blockworks.co/crypto-companies-brace-for-year-of-regulation-in-2022/" target="_blank" rel="noreferrer noopener">expect more regulatory clarity</a> this year. A <a href="https://cms.blockworks.co/bipartisan-bill-proposes-tax-exemption-for-small-crypto-transactions/" target="_blank" rel="noreferrer noopener">bipartisan bill introduced last week</a> proposed tax exemptions for crypto transactions of $200 or less.



The US and Russia both have big economic incentives to get a plan in place, considering the latter accounts for about 11% of the world’s bitcoin mining, and the former controls 35%, according to the University of Cambridge’s <a href="https://ccaf.io/cbeci/mining_map" target="_blank" rel="noreferrer noopener">Bitcoin Electricity Consumption Index</a>. Both countries boosted their hashrate following China’s mining ban.



Whit Gibbs, CEO of Compass Mining, — which operates two mining facilities in Siberia, Russia —&nbsp; pegged the country’s approach as “do-no-harm,” adding that Russia has made solid strides in wooing international investors to set up mining operations there.



“I think most nations are already considering taking similar actions to recognize bitcoin and cryptocurrencies as currency,” Gibbs said. “This positive outcome hopefully influences other nations to take the same official stance.”



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