News  •  Regulation

Bank of Russia: Bitcoin Should Not Be Rejected

| Published on July 2, 2014 at 19:00 GMT

Months after the Bank of Russia first broke its silence on bitcoin and digital currencies with stern warnings regarding their potential treatment under the law, regulators have released new statements that suggest the country is further softening its tone on the subject.

The Wall Street Journal has reported that the country's central bank is now in the process of gathering information about bitcoin and digital currencies.

Bank of Russia deputy chairman Georgy Luntovsky has said that while there has been evidence that bitcoin is being used to pay for drugs and weapons in Russia, it will not seek to take harsh measures against its use.

Luntovsky explained:

"At this stage, we need to watch how the situation develops with these kinds of currencies. These instruments should not be rejected."

Earlier this year, the Russian central bank issued a warning affirming that the use of bitcoins and other "money substitutes" is illegal in the Russian Federation, which in turn caused a widespread fear globally that Russia was seeking to ban its use. Russia is not the only jurisdiction with such legislation on the books. Until recently California had a similar law, banning alternatives to the US dollar – but it was not applied.

Nonetheless, the perception that Russia had banned bitcoin continued long after, with even one major conference postponing its event citing regulatory concerns.

Wait-and-see approach

Luntovsky hinted that his organisation is now taking a “wait-and-see” approach to bitcoin regulation, a move that could prove influential to other jurisdictions as well.

Bitcoin has notably been endorsed by a number of influential executives in the Russian financial sector, including German Gref, who served as a government minister from 2000 to 2007.

Gref currently heads Sberbank, the third-largest bank in Europe, owned by the Bank of Russia. He has said an outright ban of bitcoin would be a “colossal mistake”, and that bitcoin should be studied and regulated.

Money laundering concerns remain

In March, Russian authorities said they were open to a discussion on digital currencies and that the goal of the initial warning was not to ban bitcoin. Rather, it was issued as part of an effort to combat criminal activities that could benefit from an anonymous payments system.

Bitcoin's use in money laundering and other financial crimes is to be the subject of a forthcoming report from the Financial Action Task Force, an intergovernmental body set up to combat money laundering and terrorist financing of which Russia supports.

For more on that forthcoming report and its implications for bitcoin regulation in Russia, read our full report.

Bank of Russia image via Shutterstock

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