Keeping cryptocurrencies in non-custodial wallets may be criminalized in Russia, if authorities accept a proposal from the trade association representing Russian banks. While financial regulators think the idea deserves attention, lawmakers and experts doubt it’s possible to implement such a measure.
Russian banks act to limit the use of private cryptocurrency wallets
The challenges of seizing and seizing crypto assets held by debtors and criminals have prompted the Association of Banks of Russia (ABR) to suggest introducing criminal liability for storing coins in unsecured wallets. custodians, the organization’s vice president, Anatoly Kozlachkov, told Izvestia this week.
ABR’s initial proposal, made with the advisory assistance of the Russian Ministry of Internal Affairs, was to criminalize the undeclared storing of cryptocurrency in such wallets. The association is now leaning towards targeting refusals to provide the wallet keys when requested by authorized bodies, Kozlachkov said.
The ABR notes that it is not referring to digital assets in wallets provided by crypto exchanges, which are de facto controlled by these platforms similar to bank deposits, but to wallets controlled directly by users.
When the relevant authorities establish a connection between a debtor and a cryptocurrency wallet, for example, the person may be given a choice — to either share their keys or risk penalties for hiding property in the form of digital assets.
In addition to preventing capital outflows via crypto, the bankers say their approach would help create “a closed circuit for the circulation of cryptocurrencies” in Russia. According to the ABR, this would be impossible without an effective locking mechanism for non-custodial cryptocurrencies.
In mid-April, the ABR sent its regulatory concept to the Central Bank of Russia, the Ministry of Finance, and Rosfinmonitoring, Russia’s financial watchdog. Rosfinmonitoring told Izvestia that it deserves attention and the finance ministry was ready to consider it. Bank of Russia declined to comment.
Meanwhile, the idea has been criticized by lawmakers and crypto industry representatives on the expert council of the parliamentary task force tasked with drafting comprehensive crypto regulations. Andrey Lugovoy, vice president of the group, said he understood ABR’s concerns, but warned that the move would hamper the legalization of the crypto market.
Experts interviewed by Izvestia were also skeptical. According to Roman Yankovsky, deputy dean of the Faculty of Law at the Higher School of Economics, a leading Russian university, it’s unrealistic to identify the non-custodial wallets of ordinary citizens and seizing them would be difficult, if not impossible.
Andrey Gusev, managing partner of law firm Nordic Star, considers the introduction of criminal liability for the possession of such wallets unnecessary and argues that tax incentives and administrative fines should be sufficient to deter holders of such wallets. crypto russians to use them or hide them.
Criminalizing non-custodial wallets is “fundamentally wrong,” thinks Maxim Bashkatov, head of the Legal Development Department of the Center for Strategic Research. He points out that right now it’s unsafe for Russians to store cryptocurrency on exchanges because of the risk of asset freezes as a result of western sanctions imposed over the war in Ukraine.
