Russian Crypto Industry Association Slams Government for Doing ‘Nothing’ to Regulate Sector

The main organization representing participants in the Russian crypto space has lambasted authorities in Moscow for not doing enough to regulate the industry. The criticism comes four years after President Putin directed institutions to legally define the status of digital financial technologies.

Regulators Accused of Failure to Take Russian Crypto Market Out of Shadow

Russian regulatory bodies have been criticized for their actions regarding the cryptocurrency industry in the country. According to Yuri Pripachkin, head of the Russian Association of Cryptoeconomics, Artificial Intelligence and Blockchain (Racib), their actions are still “half-hearted” and are not aimed at finding a systematic solution for Russia’s state policy in the field of digital assets.

Speaking to the business news portal RBC, Pripachkin reminded about President Vladimir Putin’s order from Oct. 21, 2017, in which the Russian leader mandated the adoption of legislation tailored to define the legal status of digital technologies utilized in the financial sector by July 2018. The president of Racib, formerly known as the Russian Association of Crypto Industry and Blockchain, noted that since Putin issued the order, the crypto market capitalization has increased by 1,250%.

Pripachkin further emphasized that “from the point of view of regulation of the crypto industry in the Russian Federation, according to its professional representatives, absolutely nothing has been done to bring out of the shadow the domestic segment of this market (accounting for more than 10% of the global one), with turnovers comparable to the annual federal budget revenues ($270 billion).”

Cryptocurrency matters in Russia remain only partially regulated after the adoption of the law “On Digital Financial Assets” which went into force in January of this year. While it provides some regulatory clarity regarding these currencies, no rules have been introduced to govern their issuance and circulation in the country’s economy.

Pripachkin pointed out that the term “smart contract” is nowhere to be found, neither in the already approved legislation, nor in the draft laws that are currently under consideration. Then there’s crypto mining, which although not prohibited in Russia, remains unregulated. The Racib official added that there has been no progress on any of the other instructions in Putin’s order and provided another example:

Despite the establishment of a regulatory sandbox in 2018, due to the irreconcilable position of Bank of Russia towards cryptocurrencies, not a single public blockchain project submitted for testing has received approval from the country’s main financial regulator.

The Central Bank of Russia (CBR) has remained stubbornly opposed to the legalization of cryptocurrencies such as bitcoin in Russia. The monetary authority views them as money surrogates that are banned under current Russian law. Earlier this year, the bank advised stock exchanges against listing financial instruments tied to crypto assets. This week, its governor Elvira Nabiullina said the CBR is not ready to allow the trading of bitcoin ETFs.

In a situation determined by insufficient and opaque legislation, Russian crypto users find themselves forced to export an estimated 18 trillion ruble ($255 billion) worth of funds outside the Russian economy, Pripachkin remarked. That’s comparable to the total revenues of the Russian federal budget for the entire 2020, or around 20 trillion rubles, the head of Racib stated.

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