Russia's Ministry of Economic Development has criticised a proposed ban on "cash equivalents", according to a report.
The ministry said that legislation aimed at banning cash equivalents, including digital currencies like bitcoin, could have negative effects on retailers, telecom operators and banks.
Specifically, some provisions of the bill could create excessive restrictions and obligations, creating unreasonable costs for businesses, it said. The ministry therefore asked that the bill be reworked and resubmitted for further consideration.
The bill in question was drafted earlier this year by the Russian Ministry of Finance, and would prevent the issuance of digital currencies and all operations involving digital currencies – effectively placing a ban on the fledgling technology.
In September, the finance ministry suggested that Russia could pass the proposed bill in the spring of 2015.
Blow to retailers
In its comments, which were reported by Russian news agency TASS, the Ministry of Economic Development said the proposed bill lacks precision, as it could potentially ban the use of all cash equivalents including gift cards and retailers' certificates.
The bill’s definition of what constitutes cash equivalents is ambiguous, the ministry said, adding that, while the bill would ban the use of unregulated digital currencies, or 'surrogate money', it could also affect other cash equivalents.
The ministry stated:
“Participants in public debate believe that the proposed definition, interpreted literally, would apply to any other cash equivalents, such as gift cards, retailers’ certificates and various bonuses used for promoting customer loyalty and attract clientele.”
The ministry concluded that this lack of clarity could create serious difficulties for companies’ marketing campaigns, which often involve some sort of cash equivalents as part of a wider loyalty programme. For example, major telecoms operators would be unable to offer bonus points, which are a popular marketing tool.
The ministry said the bill could cause more harm than good:
"The proposed draft regulation act doesn’t solve any tasks assigned, but only serves to create legal barriers to the implementation of marketing programs of businesses and business development in general."
The proposed bill can now either be reworked to reflect the Ministry of Economic Development's criticisms, or submitted it in its current state, but including the comments.
Bill a 'step backwards'
Russia’s National Payments Council has also said the definition used in the draft bill would outlaw bonuses to consumers who prefer to pay using their cards.
The move could undermine the payments market, the council said, effectively throwing it “a few years into the past” and potentially leading to a fall in non-cash payments for goods and services.
Several companies, including major mobile carriers Megafon and MTS, have also voiced their concerns about the draft bill.
In addition, WebMoney development director Peter Darakhvelidze has said that, since Russia could soon start experiencing difficulties in accessing the global financial system, the government should not try to ban innovative financial solutions.
Support for cryptocurrencies
This is not the first time Russia’s financial sector has spoken out in favour of digital currency technology.
In July, the Bank of Russia argued that digital currencies should not be rejected. Deputy chairman Georgy Luntovsky said that, while there was evidence of bitcoin use in criminal circles, the bank would not seek “harsh measures” against its use.
German Gref, the president of state-owned Sberbank, currently the largest bank in Russia and Eastern Europe, also spoke out in favour of digital currency technology.
In an interview conducted at the World Economic Forum in Davos, Gref described digital currencies as a “very interesting global experiment” that breaks the paradigm of currency issuance.
An outright ban of bitcoin would be a colossal mistake, he said, arguing for more research into the phenomenon and "proper" regulation.
Kremlin winter image via Shutterstock