The potential ban of cryptocurrencies in Russia?

The Central Bank of Russia published a document entitled” Cryptocurrencies: Trends, risks, and regulation”, the most important provisions of the document were presented by Elżbieta Daniłowa, head of the Department of Financial Stableness in the Russian Central Bank.

The potential ban of cryptocurrencies in Russia?
Michał Gawlak

Michał Gawlak

Partner / Attorney-at-law

On January 20, 2022, the Central Bank of Russia published a document entitled” Cryptocurrencies: Trends, risks, and regulation”, the most important provisions of the document were presented by Elżbieta Daniłowa, head of the Department of Financial Stableness in the Russian Central Bank.
One of the most important parts of the mentioned document are the central bank’s suggestions for legislative changes in Russia, let me cite a few of them:
– ban on investments in cryptocurrencies by financial institutions
– ban on the use of cryptocurrencies under penalty (potential sanctions in this regard have not yet been determined)
– ban on issuing new cryptocurrencies and running services such as cryptocurrency exchange offices

The suggested solutions reported by an institution like the Central Bank herald a time of uncerteinity for Russian investors, as the implementation of the above may mean the end of legal cryptocurrency activities in the Russian Federation.
The Russian Central Bank mentions in the document that cryptocurrencies in many countries operate in the so-called “grey zone” while its suggestions to the Russian legislator clearly direct domestic investors to choose either the grey zone or the foreign market.
It is worth mentioning that the value of the virtual currency market in Russia is, according to the report, as much as $5 billion, and Russia itself is one of the leaders when it comes to “mining” cryptocurrencies.

Bitcoin an energy threat to the Russian Federation?

In the report presented at the conference we can also find bizarre statements about the alleged energy threat posed by “mining” cryptocurrencies-“Cryptocurrency mining causes unproductive consumption of electricity, which threatens the power supply of residential buildings, social infrastructure and enterprises, as well as the implementation of the Russian environmental protection program.”
I will write again because I do not know if you are getting the content of this sentence: Cryptocurrency mining threatens the power supply to residential buildings-I admit that last time I was similarly amused was when the Polish Prime Minister’s announcement regarding e-sports as a way to get children out of their homes.

The above content clearly indicates that the Central Bank of Russia has no idea about cryptocurrency mining.
An interesting point remains that in recent days we could hear the announcement of the company Intel, known to most of the public, about the introduction of cost-effective chips for mining cryptocurrencies, which are expected to significantly reduce power consumption when mining cryptocurrencies. This is quite a “fresh” announcement so I am hoping for a reliable reference to it by the Russian central bank.
I wonder how the digital ruble will look in the context of energy consumption…

Where will the 5 billion USD of capital go?

If not the Russian market, where should investors look for a place to develop cryptocurrency businesses?- the most likely direction will be the West.

Regulation of cryptocurrencies is definitely better the further west you go, let’s look at the example of China or India, which regularly scare the market with the banning of cryptocurrencies or even actually ban them, this is certainly not favorable for cryptocurrency businesses that would like to thrive. Until recently, investors chose Estonia or Malta, but recently there has also been growing interest in running this type of business in Poland, why? – all thanks to a newly established registry.
Register of Virtual Currencies

On October 31st, 2021 a register of virtual currencies was introduced in Poland – therefore the activity in the field of cryptocurrencies has become a regulated activity.

Who is obliged to register in the said register? – Obviously, all entrepreneurs who conduct activity in the field of virtual currencies in the Republic of Poland consisting in:
– exchange between virtual currencies and means of payment;
– exchanges between virtual currencies
– Intermediating in the exchanges referred to above;
– maintenance of accounts providing authorized persons with a possibility to use virtual currency units, including carrying out transactions of exchange thereof.
Is an entry in the register itself an advantage for entrepreneurs?

An entry is an obligation of all entities engaged in the above mentioned activities, so without it, operating in Poland after 30 April 2022, because that is the deadline for entering an entity into the register, each entity will be exposed to penalties. All later established entities will have to register on an ongoing basis to the said register.

Financial institutions look much more favourably on entities which operate in a fully legal manner, having obtained all possible permissions. Therefore, if you run a company dealing with virtual currency trading and you apply for a bank account, you should present a proof that you are registered in the register of virtual currencies.

If you need assistance in obtaining a registration, please contact our law firm – we were one of the first in Poland to obtain a registration in the register of virtual currencies for our Client.

Our foreign companies team will be happy to help you implement your business model in Poland, and advise you on the most advantageous legal form for your business.

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Michał Gawlak

Partner / Attorney-at-law
Accounting