Russia recently signed a new cryptocurrency law that while stopping short of the previous ban on cryptocurrencies, still imposed stringent restrictions on its use in as form of monetary currency. This followed an earlier regulatory filing that essentially associated any activities involving cryptocurrencies as criminal, and placed them under the lens of anti-money laundering regulations.
Starting January 1st, 2021, cryptocurrencies will be allowed in Russia, though they will not be allowed to be used in exchange for any goods or services. There may be more regulation coming in upcoming sessions, but as of now, it seems that Russians can mine, trade cryptocurrencies for other cryptocurrencies on exchanges, and own cryptocurrencies without any legal issues — so long as they don’t spend it on other goods and services within the domestic economy. Russian banks will be allowed to open up cryptocurrency exchanges under the supervision of the central bank — and new digital currencies can be issued, but only again, under the control of the central bank. This represents a more liberal attitude than what some had predicted would be a near-total ban on cryptocurrency activity in Russia, and shows a more pragmatic attitude towards cryptocurrencies and their adoption in Russia.
The story of the legislation surrounding Russia’s attitude to cryptocurrency is nuanced, but follows some common themes. Cryptocurrency is portrayed as “criminal” while blockchain is seen in a neutral-to-positive light. This echoes the Chinese state’s view on the binary nature between what are essentially two sides of the same coin: the blockchain, a public ledger upon which cryptocurrencies are built upon that is seen as an essential yet centralizing force to help governments accelerate the benefits of digitization — and cryptocurrencies, which are regarded as eroding domestic power and currency.
Indeed, one of the strongest opponents of cryptocurrencies in Russia has been the central bank, which in September 2017, issued a letter warning of criminal acts associated with cryptocurrencies. This followed a 2014 letter where the central bank warned that cryptocurrencies could be used for money laundering and to support terrorism. The central bank came out and said that cryptocurrencies were more like gambling than any kind of investment recently and said that the government should do nothing to encourage citizens to use cryptocurrencies. In the background are Russia’s stringent new Internet regulations, Russia’s Sovereign Internet Bill. Russia’s Internet censor, and even satellite Internet providers are required to use ground relays that are regulated by the Russian state.
In this way, Russia’s digital tools allow for a total surveillance state of digital activity. The new cryptocurrencies regulation borrows from a similar approach — a strong centralized government institution (in this case, the Bank of Russia) through which all transactions flow, and a begrudging acceptance of the pragmatic reality that many Russian citizens have adopted and used cryptocurrencies, from the dramatic rise of Russia-hosted ICOs, to Russia-based social media network VK considering its own cryptocurrency.
In many ways, the story of cryptocurrencies follows some themes of Telegram overcoming censorship through popular adoption. Eventually, government officials started using Telegram to transmit messages themselves, and while Roscomnadzor set up multiple IP blocks — Telegram engineers worked around the clock to ensure that security, privacy and uptime were as guaranteed as possible under the circumstances. Finally, the Russian government bowed to the inevitable and used Telegram to transmit critical health information during the COVID-19 pandemic.
Similarly, cryptocurrency protocols are built to be as resilient and are incentivized to be usable for many local contexts despite its global focus. Attempts to censor or control the flow of cryptocurrencies will be countered somewhat by their popular adoption and also by government projects seeking to use adjacent blockchain ideas to digitize and scale their control. It’s a bottoms-up way of articulating democratic principles in technology choices, which forces top-down approaches to moderate. This may just be another case of this. As cryptocurrency adoption continues proliferating in Russia, it seems to have stopped the decree of a total ban — for now.