The Ministry of Finance of the Russian Federation has released the full version of the draft bill that, if passed in current form, would effectively ban the creation and distribution of software that allows for the use of money substitutes, including bitcoin and all digital currencies.
First announced as a proposal in August, the news marks the first time that the Ministry of Finance has made the proposed law public, as well as its definition of “money surrogates” under which bitcoin and digital currencies may be prohibited.
The two-page draft bill details a series of administrative fines to be imposed on both businesses and private citizens who issue, create or deliberately disseminate information about the release or operation of digital currencies, the language implying that the law would apply to much of the bitcoin industry, from bitcoin users to miners and service providers.
For example, individuals who are found to issue or create bitcoin or digital currencies will be penalized with fines of 30,000–50,000 rubles ($750–$1,250). Similarly, officials found to engage in such practices will be subject to fines of 60,000–100,000 rubles ($1,500–$2,500), while legal entities will be eligible for fines of 500,000–1m rubles ($12,500–$25,000).
A similar series of fines is also detailed for those found to have disseminated information that “permits the release of money substitutes”. Individuals engaging in this practice would be subject to fines 5,000–50,000 rubles ($125–$1,250); officials, 20,000–100,000 rubles ($500–$2,500); and legal entities 500,000–1m rubles ($12,500–$25,000).
At press time, much of the domestic industry was still reacting to the news. Anton Vereshchagin, founder of InterMoneyExchange, which had planned to launch in Russia but has since moved to other markets, told CoinDesk:
“If earlier Central Bank statements suggested Russia would follow the FATF and other recommendations and regulate bitcoins, now it seems that the chances are very very small.”
He added: “In fact, the restrictions and prohibitions are only getting worse.”
The draft bill also calls for the amendment of the definition of money surrogates in Russia to include language that would cover new financial technologies such as digital currencies.
Under the revision, the definition would include any “monetary unit” issued as a means of payment or exchange and not allowed under federal law.
The law would also be revised so that those who promote or encourage such activities are also in violation of the law. One provision calls for the law to be amended to “prohibit the dissemination of information that permits release (emission) of money substitutes and (or) the operation with their use.”
The latest language in the draft bill confirms fears long harbored by many other Russian market observers.
Artem Tolkachev, managing partner at the law firm Tolkachev & Partners, who has spoken publicly at Russian bitcoin conferences and who advises bitcoin startups on local regulation, told CoinDesk in September that he was pessimistic the law might only apply to those seeking to exchange fiat money for digital currencies.
In particular, Толкачев pointed to statements from the Ministry of Finance in September that suggested the bill might make this interpretation. The statement read:
“We are not going to prohibit people to play checkers and to call checkers money. What we prohibit is to exchange substitutes to money and vice versa.”
Толкачев also pointed to the gradual evolution in statements from Russian authorities as well as the milder positions of the Bank of Russia, the country’s central bank.
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