Russia’s vast oversight of cryptocurrency transactions appears to have one crucial blindspot: There doesn’t seem to be any liability for criminals who use digital assets to conduct illegal transactions.
On Thursday, Russia’s Ministry of Finance proposed new amendments to the country’s cryptocurrency laws that seek to clarify rules around tax evasion. Under the proposed guidelines, Russians can face up to three years in prison for failing to report transactions of 45 million rubles ($583,000) or more at least twice in three years
An earlier ministry proposal recommended three-year prison sentences for anyone who fails to report transactions of over 1 million rubles ($13,000).
Citizens must also report transactions and wallet amounts that exceed 600,000 rubles ($7,700) in a calendar year. A failure to report on time could result in a fine of 50,000 rubles ($640).
Strangely absent from the new guidelines is any liability for criminals who continue to use cryptocurrency for illicit transactions.
Maria Stankevich, head of business development at crypto exchange EXMO, told Cointelegraph:
“We don’t see any criminal liabilities for the dark crypto market or the cash exchangers in Moscow that are still processing large amounts of dirty crypto. Basically, what the government is trying to do is to prosecute the citizens instead of creating solid regulations of bad market players (as for example the UK does).”
Mikhail Uspensky, a consultant for Russia-based law firm Taxology, said the new ministry guidelines also ignore so-called “gray crypto exchanges” that account for the bulk of shadow market transactions.
“It was decided not to apply criminal liability to them, and the main risks of criminal prosecution should be passed on to ordinary owners of crypto assets,” Uspensky told Russian media outlet RBC.
Russia’s crackdown on crypto holders comes at a time when policymakers are seriously considering the merits of a central bank digital currency, or CBDC. The Bank of Russia is broadening its efforts to understand CBDCs in the wake of the COVID-19 pandemic, which has had a destabilizing effect on monetary policy.