Cryptocurrency Regulation in Russia: Mining, Laws, and Uncertainty
The legal status of cryptocurrency and the approach of Russian law to crypto operations have been actively discussed since around 2015. Over the years, there have been far more initiatives, plans, and proposals than actual actions. News headlines about the status of cryptocurrency in Russia often read “planning to introduce…”, “planning to ban…”, “planning to allow…”, and so on. The volatility of these plans rivals that of cryptocurrencies themselves.
What Has Been Proposed in the Last 5 Years?
- Legalize mining and cryptocurrency circulation
- Ban it, with fines and even prison sentences
- Issue a national cryptocurrency
- Classify cryptocurrency as money, property, foreign currency, digital goods, or financial assets
- Wait for cryptocurrencies to fade away on their own
Let’s break down where these proposals came from and what’s happening now.
National Cryptocurrency: The “Cryptoruble”
Back in 2016, Pavel Livadny, State Secretary and Deputy Director of Rosfinmonitoring, mentioned the idea of a national cryptocurrency in interviews, saying it was being discussed with banks, the Ministry of Finance, and the Central Bank. However, “being discussed” didn’t mean it would be implemented.
Minister of Communications Nikolai Nikiforov was more confident, stating, “I’m sure we’ll launch the cryptoruble, because if we don’t, our neighbors in the Eurasian Economic Union will do it in two months.”
Creating a national cryptocurrency would have been a major step, reflecting the government’s interest in the crypto market. Another reason for this interest was international sanctions—almost all countries facing sanctions today deal with cryptocurrency in some way.
But the idea never moved beyond discussion. The Central Bank (CBR) had already, in 2014, issued a letter stating that crypto transactions would be considered suspicious. The CBR, led by Elvira Nabiullina, continues to focus on the risks of cryptocurrencies. In 2015, the CBR created a working group to study blockchain technology, but it clearly separates blockchain as a technology from cryptocurrency as its derivative. The CBR supports blockchain but opposes “monetary surrogates.”
Calls for Criminalization
On the other end, in 2016, Alexander Bastrykin, head of the Investigative Committee, threatened to introduce criminal liability for using cryptocurrencies, including Bitcoin, citing the need to fight “bubbles” in the financial market. Fortunately, this did not happen, and the question of why the Investigative Committee was discussing financial bubbles remained unanswered.
Attempts at Regulation
Between enthusiasm and prohibition, there have been various attempts to regulate the existing crypto market, recognizing the scale of cryptocurrency circulation. However, agencies could not agree on the legal status of cryptocurrency:
- In May 2017, CBR Deputy Chair Olga Skorobogatova suggested classifying cryptocurrencies as digital goods and taxing them.
- In August 2017, Deputy Finance Minister Alexey Moiseev argued that cryptocurrency should be regulated as property and classified as a financial asset, with a ban on private sales and exchange trading limited to qualified investors.
On October 10, 2017, at a meeting on digital technologies with President Vladimir Putin, Finance Minister Anton Siluanov stated that the government intended to “lead and regulate” the issuance and circulation of cryptocurrencies. Putin ordered clear definitions for terms like “distributed ledger,” “digital letter of credit,” “token,” “smart contract,” and “cryptocurrency” in Russian law, but made it clear that the ruble would remain the only legal tender.
Draft Laws and Legal Definitions
On December 28, 2017, the Ministry of Finance and the CBR presented the first draft law on legal regulation of digital technologies in finance, mainly focused on ICOs and not on cryptocurrency circulation. The final version was to be prepared in the first half of 2018.
In January 2018, the Ministry of Finance introduced an updated draft law “On Digital Financial Assets” (DFA), adding legal definitions for cryptocurrency, tokens, mining, etc. DFAs, including tokens and cryptocurrencies, were defined as electronic property created using cryptographic means, with ownership rights recorded in a digital transaction ledger. The draft emphasized that cryptocurrencies are not legal tender in Russia.
According to the Ministry of Finance, cryptocurrencies and tokens could only be exchanged for money or other digital assets by specialized legal entities. Private individuals could buy tokens up to 50,000 rubles per issue, only through special accounts linked to legal operators’ e-wallets.
Changing Attitudes and Ongoing Uncertainty
While the Ministry of Finance was working on the draft, then-Prime Minister Dmitry Medvedev suggested in January 2018 that cryptocurrency might be a temporary phenomenon that could disappear in a few years, much like many early internet companies did in the 1990s. However, since cryptocurrency did not disappear, the draft law continued to evolve. By September 2018, the term “cryptocurrency” was removed from the latest version, and mining was defined only as token issuance for investment. The draft regulated only token operations, leaving the status of cryptocurrencies unclear.
The chapter on “digital money” (cryptocurrencies) was also omitted from the “On Digital Rights” law, adopted in March 2019, even though it was in the original version. This law amended the Civil Code to introduce basic concepts for the digital economy, but the key term “digital money” was left out. Industry experts criticized this approach, arguing that the lack of established definitions would force crypto businesses to operate abroad.
Bank Scrutiny and International Rankings
In May 2019, Sberbank made headlines by demanding clients justify income from cryptocurrencies, asking for wallet addresses, nicknames, mining farm details, and electricity bills. This caused outrage, as the terms used by the bank did not yet exist in Russian law.
That same year, the “Flying University” published a ranking of countries with the most favorable conditions for blockchain and crypto business development. Russia ranked 18th.
2020: New Laws and Stricter Proposals
In May 2020, an updated draft law “On Digital Financial Assets” was posted on the State Duma website, along with additional documents proposing stricter regulation. This draft effectively banned the circulation and mining of foreign cryptocurrencies in Russia and introduced administrative and criminal liability for violations. These proposals faced strong criticism from both the professional community and some government agencies.
On July 22, 2020, the State Duma finally passed the law on digital financial assets (DFA) and digital currency in the third reading, but the accompanying documents were sent back for revision. The law was signed by President Putin on July 23.
The adopted law finally defines cryptocurrency but prohibits its use for payment of goods and services.
What Is Officially Adopted?
Currently, four documents define the legal status of cryptocurrencies in Russia:
- The draft law on DFAs
- Amendments to the Civil Code regarding digital rights
- The law on crowdfunding platforms
- The law on digital currency (expected in the fall)
Of these, only the second and third have been adopted so far.
What Does the DFA Law Propose?
The law finally provides two definitions: digital currency and DFA. It states that digital currency can be used for transactions, savings, and investments, but not for purchasing goods and services or advertising such opportunities. Digital currency is considered property, so it can be subject to seizure.
DFAs are defined as electronic property: cryptocurrency and tokens. They are similar to securities but will have a separate legal regime in Russia, with the CBR maintaining their registry. Any individual can acquire digital assets (with possible limits on amounts and types). DFAs can be purchased from credit institutions or other legal entities and entrepreneurs, but only if issued under Russian law. Foreign tokens can be bought on overseas platforms but must be declared as property. Only government officials are prohibited from owning foreign-issued cryptocurrency.
Only blockchain platform operators registered with the CBR can issue their own tokens. Such operators must be Russian legal entities or sole proprietors with a minimum authorized capital of 50 million rubles at the time of application.
What’s Next?
The draft law regulating cryptocurrency circulation is still being finalized. Anatoly Aksakov, head of the State Duma’s Financial Market Committee, says the laws on DFAs and digital currency should take effect simultaneously on January 1, 2021. When asked how liberal the next draft law would be, Aksakov replied that the approach would be “creative.”
In the fall, the Ministry of Finance proposed amendments to the DFA law that would ban all transactions with digital money except inheritance, bankruptcy, and enforcement proceedings. These were not adopted, but new amendments were later proposed, again with confusing terminology. One central idea was to equate cryptocurrency with property and require taxes on its circulation, including penalties for undeclared transactions.
Interestingly, while officials were preparing stricter amendments, in August the first loan in Russia secured by Waves crypto coins was issued, and the JohnCalliano Festival Summer accepted payment in tokens bought with Bitcoin—over 120,000 rubles worth of tokens were purchased with BTC.
Contradictions and the Future
On one hand, distributed ledger systems (the basis of cryptocurrency) are highlighted in the “Digital Economy” program as one of nine “cross-cutting” technologies considered part of the national development strategy. The government plans to allocate over 36 billion rubles for blockchain development by the end of 2024. The president emphasizes the importance of regulating the crypto industry. The issue has been studied for years. Sberbank CEO Herman Gref, a major figure in Russia, has repeatedly spoken positively about cryptocurrency, the importance of distributed ledger technologies, and has admitted to investing in Bitcoin himself.
On the other hand, the Central Bank remains cautious, government agencies issue contradictory initiatives, and key definitions appear and disappear from draft laws. This uncertainty and instability encourage crypto project creators to operate abroad, in countries with clearer and more stable positions on cryptocurrency.