2022 is Set to Be a Watershed Year for Russia’s Crypto Industry

Russia is currently in the midst of a crypto conundrum. The country, which began to show relatively positive behavior towards the crypto market last year, is now split between factions concerning what to do with the market.

2022 is Set to Be a Watershed Year for Russia’s Crypto Industry

With 2021 all but done and dusted, there is no doubt that everyone will be looking to see how the Russian government handles regulations in 2022.

Failure to Build on 2020’s Progress

Back in 2020, the Russian parliament passed On Digital Financial Assets - its most prominent pro-crypto law. While the law recognized cryptocurrencies as financial assets in the country, it didn’t do much to explain the rights that exchanges and other firms in the market have in the country. The law was also insufficient when it came to offering a safer environment for private citizens to make crypto investments.

Considering how shifty governments have been on the issue of cryptocurrencies, investments into Russia’s crypto space have been sparse. Things are especially bad in Russia as the government has different tones over what it will do regarding cryptocurrencies.

Russia’s shifting stance has even affected media reports. Earlier this month, Reuters reported that the Central Bank of Russia is looking to ban cryptocurrencies. The report cited risks that cryptocurrencies pose to financial stability in the country, and the growing rate of transactions flowing out of its economy.

If enacted, the ban will reflect sentiments made by Russian President Vladimir Putin, who claimed that cryptocurrencies bear high risks. Speaking at an investment forum in Moscow, Putin said in November that cryptocurrencies aren’t backed by anything. He added that they are incredibly volatile, and the government will need to develop the right mechanisms to monitor crypto transactions.

Some Prefer to Offer Regulatory Clarity

But, not everyone believes that crypto should be banned in Russia. Anatoly Aksakov, the chairman of Russia’s parliamentary Committee on Financial Markets, explained that the country’s financial regulators would be better off creating an approval template for crypto exchanges. According to a local news source, Aksakov said:

“There exists a very tough approach about the complete prohibition of cryptocurrencies, such as acquisition or ownership. There [also] exists an approach where there must be appropriate crypto exchanges, where everything is legalized, transparent, and understandable to regulatory bodies. It would be easier for the Federal Tax Service of Russia to tax such [exchange] transactions.”

Aksakov has also been a proponent of crypto mining regulation, claiming that the activity could generate revenues for the government. However, nothing concrete has been done for now.

To Invest or Not to Invest

The shifting stance on crypto has also extended to investments. This month, the Bank of Russia published a statement confirming that mutual funds in the country would not be allowed to make crypto investments.

Even though the document expanded the number of assets available for mutual funds to invest in, these fund managers are now barred from buying any cryptocurrencies. The ban also extends to “financial instruments whose values depend on the prices of digital assets.” Fund managers are not allowed to offer crypto exposure to an investor, whether qualified or non-qualified.

On the flip side, Vladimir Chistyukhin, the Bank of Russia’s deputy governor, also told state-owned media that crypto investments would be allowed via foreign firms.

“Russian citizens and businesses have the right to acquire and hold cryptocurrency, but not through the domestic infrastructure or intermediaries,” Chistyukhin said, adding that the Russian government is still working to offer additional clarity on its local crypto space.

All Eyes on the Coming Year

All in all, there is no doubt to the fact that 2022 will be important to Russia’s crypto industry. The country is one of the largest in the world, and its ability to get crypto right will definitely help any of its citizens who would like to make investments in the industry.

We should note that the fact that Russia’s government hasn’t banned crypto doesn’t mean that they probably don’t have plans to. In fact, top officials in the government seem more likely to impose a ban than to welcome cryptocurrencies into the country.

At a recent press conference, Elvira Nabiullina, the governor of the Bank of Russia, explained that the agency remains mildly skeptical about cryptocurrencies. He pointed out that the assets are very volatile, and the Bank of Russia could eventually ban them to protect its citizens.

“In addition, cryptocurrencies are opaque in that they are frequently used for illegal operations or criminal nature. Therefore, we cannot welcome investments in them. We seek to prevent the Russian financial infrastructure from using crypto transactions. This is quite doable."

Whatever the Russian government does decide, it will be interesting to see how things turn out in the country. 2022 is set to be a big year indeed.

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