As of February 2016 Bitcoin use in Russia wasn’t banned, but it wasn’t technically speaking legal either. That all changed a month later however, when Russia’s Ministry of Finance put forth news laws regulating the use of Bitcoin within the countries borders.
While some analysts suggested these laws were enacted to prevent hackers and cyber threats from secretly exchanging money for criminal acts inside the country, the Government of Russia maintains the laws were meant to crack down on corruption, banking fraud and money laundering.
As reported by Interfax, a state run Russian news paper on March 13th 2016, “officials from the country’s Ministry of Finance have gone through a series of amendments to the current penal code that would allow them to penalize citizens for the use of Bitcoin and other cryptocurrencies, each harsher than the previous.”
According the report, any citizen caught trading in Bitcoin or participating in Bitcoin mining could face up to 4 years in prison, as well as fines up to 500,000 rubles ($7,100 / €6,400). For any organized groups of individuals, the prison sentences would remain the same but the fine would increase up to 1 million rubles. To cut down on corruption within some of Russia’s largest institutions, any financial executives or bank managers caught trading in Bitcoin would face up to 7 years in prison, with fines reaching anywhere from 1 million to 2.5 million rubles.
Before these laws were enacted, Bitcoin transactions were treated much like a misdemeanor offense in the United States, with prison sentences lasting up to 1 year.
According to a report by Bloomberg Markets this week however, Russia’s stance on the cryptocurrency might soon be changing. Last month Bank of Russia Deputy Governor Olga Skorobogatova said that by the middle of 2017, the Russian legislature would attempt to classify Bitcoin as an “asset, cash or security” and Deputy Finance Minister Alexey Moiseev said this week that he remains hopeful that Russian authorities can begin to “recognize bitcoin and other cryptocurrencies in 2018.”
According to analysis by Bloomberg, Russia’s decision to crack down on Bitcoin in 2016 was not so much to take stance against Bitcoin specifically. Rather, it was part of a greater effort to stop illegal money laundering, which was stealing money/currency/taxes from the Russian Government and pumping it into foreign markets. According to data from Russia’s Central Bank, these efforts have also been a great success.
Over the course of the last 3 years, hundreds of financial officials have been arrested on corruption charges and the Government has allegedly saved as much as 500 – 771 million dollars from illegally flowing into foreign markets. It is as a direct result of this success that Russian authorities are now considering taking a second look at Bitcoin as a legitimate form of currency, perhaps even legalizing the commodity as soon as next year.
Olga Skorobogatova says there are a couple ways to go about making this happen. More than likely though, Russia will attempt to make Bitcoin wallets regulated by financial institutions such as banks. This mean that if anyone in Russia wanted to legally own Bitcoin they would have to register an account with a bank, whom would then store and secure the funds for them. In many ways, a bank regulated Bitcoin wallet would serve the exact same function as a monetary savings/checking account. This would also add legitimacy and transparency to any transaction made using the cryptocurrency.
Despite a few down years and speculation that the currency might soon be dead in the water early in 2015, Bitcoin has seen a surge in value in recent years. Since the start of 2016, Bitcoin values have increased by 28% and Bitcoin stocks are currently trading at $1,215.85 a share, making the cryptocurrency more valuable than Gold at this point in time.
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