Russian central bank issues guidelines banks should block crypto-related activity

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Russian central bank issues guidelines banks should block crypto-related activity

The Bank of Russia last week decided to ban banks and other regulated financial institutions from allowing value transfers related to crypto-assets and crypto-asset exchanges. Citing the supposed prevalence of illicit activity within the crypto ecosystem, as well as broader systemic concerns related to what the regulator has called the underground economy, “the central bank bundled crypto-asset exchanges with illegal or restricted businesses such as online gambling and pyramid schemes. Such strong language makes it clear that while there is no law prohibiting the offering of crypto services in the Eurasian state, regulatory pressure will be exerted. on any financial services entity ignoring or circumventing the edict.

The Russian government has a unique history of regulating cryptoassets. Although the local tax regulator has long lobbied for unfettered access to consumer bank accounts, in an ongoing hunt to detect and capture tax evaders using crypto-assets, other sectors of government, including the central bank , rejected these requests. Likewise, although there have been repeated calls for an outright ban on crypto in Russia, the powerful pro-business lobby there has so far outstripped such efforts.

The Bank of Russia has already weighed in on crypto issues in several ways. Notably, in an effort to issue a ruble-based central bank digital currency (CBDC), Russia has sought to limit the influence of stablecoins in payment settlement processes. Earlier this year, Ivan Zimin, head of the financial technology department of the Bank of Russia, spoke at a meeting of the Russian Union of Industrialists and Entrepreneurs and said:

We will most likely take the second step by limiting the use [of] stablecoins, for settlements. Its very important. The digital ruble and, in general, the ruble [will be] official means of payment. Everything else, stablecoins, unsecured private cryptocurrencies, or other monetary substitutes cannot be used as a form of payment.

While it is clear that the Russian state is not entirely opposed to the introduction of technology related to cryptoassets (as evidenced by its exploration of a digital ruble), it is also clear that it is to of the utmost importance to ensure that any new technology ultimately serves the interests of government. This may explain why crypto-asset mining is proliferating in Russia, despite the largely negative regulatory sentiment that has been expressed by the government regarding the sector more generally. Mining can be used to evade sanction controls, facilitate the generation of significant wealth, and help achieve state goals. Finding the confluence of interests between government and the public will be key to promoting a healthy and viable cryptoasset industry in Russia.

. Uzbek regulators will maintain crypto ban

Uzbekistan’s ban on crypto-asset payments and merchant services will likely remain in place, said Behzod Khamraev, vice president of the Central Bank of Uzbekistan. Uzbek citizens have not been allowed to execute crypto payments since at least 2019, with local regulators saying the volatile and non-backed nature of most assets makes them unsuitable for payment intermediation. While there may not be an immediate potential for residents of Uzbekistan to mine cryptoassets for payment, the news is not so bad. A regulation proposed by the president’s executive office would revoke the current ban on all crypto purchases and allow all types of crypto exchanges involving crypto assets and tokens in exchange for both domestic and foreign currency.

. US Senate seeks advice from SEC on crypto regulations

Members of the Senate Banking Committee lobbied SEC Chairman Gary Gensler to provide clear guidance on regulatory expectations for cryptoassets last week. Republican Ranking Member Pat Toomey, a notable participant in the ongoing debate over crypto regulation, has pushed the SEC to pass rules and regulations to promote innovation and continued development in this new industry. financial services industry. On the flip side, Toomeys’ Democratic counterparts have stressed the need for increased regulation to protect consumer interests and limit retail risks. Gensler, who has hinted that the SEC will expand its regulatory jurisdiction over crypto, is widely seen as an ally of Democrats in this regard, having previously said that [c]Currently, we simply don’t have enough investor protection in crypto finance, issuance, trading or lending. “

. SEC sues infamous Chinese billionaire over illegal ICO

Notorious Chinese billionaire Guo Wengui, who lives in exile in New York City, agreed to pay the SEC a settlement within two weeks over allegations that entities he controls engaged in an illicit initial coin offering of money, as well as an equally unacceptable initial public offering. Guo, aka Miles Kwok, known for his close connections with controversial political figures such as Steve Bannon, is said to have orchestrated a scheme to withdraw money from investors seeking to obtain G Dollars, a crypto-asset purportedly redeemable for gold. The SEC found that the Guos companies did not adequately disclose to investors details regarding the continued operation of the nascent asset and platform.

. Australia launches central bank digital currency research team

The Reserve Bank of Australia (RBA) launched its search for a CBDC team last week, fueling speculation the country is looking to become a leading innovator in the digital currency space. Australia would be the first major Western country to launch a CBDC and could serve as a model for compliance and operational implementation going forward. The job posting indicates:

We are investigating whether there is a case for a CBDC in Australia and, if so, how it could be designed and what benefits and other implications this would have. This work contributes to one of the RBA’s strategic focus areas to support the evolution of payments in Australia.

The launch of a CBDC poses interesting questions, including whether or not the government will attempt to monitor the entire transaction ecosystem, or instead rely on intermediaries to perform such monitoring of activities. Depending on the model chosen, tools such as Lens and Elliptic’s Navigator may be essential in enabling regulators to detect cases of suspicious activity and potentially prohibit transactions with a link to bad actors.

Did you know that … you can now filter transactions / addresses to know your exposure to risky countries / jurisdictions in Navigator? Speak to a team member today to find out more.

Listen to episode three of our new Crypto Decoded podcast on Apple or Spotify.

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