Crypto regulatory affairs: Russia’s central bank issued guidelines that banks should block crypto-related activities

🇷🇺 Russia’s central bank has issued guidelines that banks should block activities related to cryptocurrencies

The Bank of Russia last week banned banks and other regulated financial institutions from allowing the transfer of value related to cryptoassets and cryptoasset exchanges. Citing the alleged prevalence of illegal activities taking place within the crypto ecosystem, along with broader systemic concerns about what the regulator called the “gray economy,” the central bank lumped cryptoasset exchanges with illegal or restricted businesses such as online gambling and pyramid schemes . Such strong language makes it clear that while there is no existing law prohibiting crypto-services from being offered in Eurasia. states, regulatory pressure will be brought to bear on any financial services entity that ignores or circumvents the edict.

The Russian government has a unique history of regulating cryptoassets. Although the local tax regulator has long pressed for unfettered access to consumers’ bank accounts, in an ongoing quest to detect and catch tax evaders using cryptoassets, other sectors of government, including the central bank, have rejected such requests. Similarly, while there have been multiple calls for a complete ban on cryptocurrencies in Russia, the powerful pro-business lobby there has so far thwarted these efforts.

The Bank of Russia has previously considered cryptocurrency issues in several aspects. In particular, in seeking to issue a central bank digital currency (CBDC) based on the ruble, Russia has sought to limit the influence of stablecoins in payment settlement processes. Earlier this year, Ivan Zimin, Head of the Financial Technologies Department of the Bank of Russia, spoke at a meeting of the Russian Union of Industrialists and Entrepreneurs and stated:

We will most likely take the second step by limiting usage [of] stable coins, for settlements. This is very important. Digital ruble and, in general, ruble [will be] official means of payment. Everything else – stablecoins, unsecured private cryptocurrencies or other monetary substitutes – cannot be used as a means 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 their research into the digital ruble), it is also clear that it is of utmost importance to ensure that any new technology ultimately serves the interests of the government. This may explain why crypto-asset mining is expanding in Russia, despite the largely negative regulatory sentiment expressed by the government towards the sector in general. Mining activity can serve to evade sanctions controls, facilitate the creation of significant wealth, and otherwise work to achieve state goals. Finding a confluence of interests between the government and the public will be key to promoting a healthy and sustainable crypto-asset industry in Russia.

🇺🇿. Uzbek regulators to maintain cryptocurrency ban

Uzbekistan’s ban on crypto-asset payments and merchant services is likely to remain in place, said Behzod Khamraev, deputy governor of the Central Bank of Uzbekistan. Uzbek citizens have been banned from making crypto payments since at least 2019, with local regulators arguing that the volatile and unsupported nature of most assets make them unsuitable for payment mediation. While there may not be immediate potential for Uzbek residents to use cryptoassets for payment purposes, the news isn’t all bad. A proposed executive order from the president’s executive office would repeal the current ban everything cryptocurrencies and enables “all types of crypto exchange trading involving crypto assets and tokens in exchange for national and foreign currency”.

🇺🇸. US Senate seeks guidance from SEC on crypto regulations

Members of the Senate Banking Committee pressed SEC Chairman Gary Gensler to provide clear guidance on regulatory expectations surrounding cryptoassets last week. Republican Ranking Member Pat Toomey, a prominent participant in the ongoing debate over crypto regulation, has asked the SEC to adopt rules and regulations aimed at promoting innovation and the continued development of this new sector of the financial services industry. On the other hand, Toomey’s Democratic colleagues emphasized the need for increased regulation to protect the interests of consumers and limit retail risk. Gensler, who has hinted that the SEC will move to expand its regulatory reach over cryptocurrencies, is widely seen as an ally of Democrats on the matter, having previously stated that “[c]”Currently, we simply do not have sufficient investor protection in crypto financing, issuance, trading or lending.”

🇨🇳. SEC Prosecuting Notorious Chinese Billionaire for Illegal ICO

Notorious Chinese billionaire Guo Wengui, who lives in exile in New York, has agreed to pay a settlement to the SEC within two weeks over allegations that entities he controls were involved in an illegal initial coin offering, along with an equally illegal initial public offering. Guo, better known as Miles Kwok, who is known for his close ties to controversial political figures such as Steve Bannon, allegedly orchestrated a scheme to extort money from investors who wanted to obtain “G Dollars,” a cryptocurrency purported to can be exchanged for gold. The SEC found that Guo’s companies failed to adequately disclose to investors the details of how the newly created assets and platform would operate on an ongoing basis.

🇦🇺. Australia launches Central Bank digital currency search team

The Reserve Bank of Australia (RBA) launched a search for a CBDC team last week, fueling speculation that the country will seek to become a top 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 in the future. The job ad says:

We explore whether there is a case for a CBDC in Australia, and if so, how it might be designed and what benefits and other implications it would have. This work contributes to one of RDA’s strategic focus areas of supporting the development of payments in Australia.

The launch of a CBDC raises interesting questions, including whether the government will attempt to monitor the entire transaction ecosystem or instead rely on intermediaries to monitor such activities. Depending on the selected model, tools like Lens and Navigator from Elliptic can be instrumental in enabling regulators to detect instances of suspicious activity and potentially stop transactions linked to bad actors.

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

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

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