Russia to Ban Funds from Crypto Investment, Experts Warn of ‘Blurry’ Legal Status
The Russian Central Bank has made it illegal for Russian financial institutions to deal with crypto-related mutual funds.
The adamantly anti-crypto organisation, which also regulates the local financial industry, declared in a press release that it has prepared a draught directive on which it will accept input until December 27, 2021.
Other mutual fund-related restrictions are included in the directive, but crypto-savvy banks will be surprised to learn that the Central Bank proposed a “ban” on “the investment of funds in mutual funds, including those intended exclusively for [industrial] investors, in digital currencies and financial instruments, the price of which is dependent on the rates of digital currencies” – essentially all tokens and crypto derivatives.
The bank also reminded the public that it had previously advised “not to invest in such assets” to individuals and businesses (in fact it has done so on multiple occasions). It further stated that its actions “would not only boost the investing potential of mutual funds but also strengthen investor rights protection.”
The Central Bank has sought to oppose pro-crypto legislation on every occasion and is stuck in a stalemate with other more business-friendly sectors of the government.
It came out against a plan backed by MPs to legalise and regulate crypto mining last month. Recently, lawmakers pushed the bank to change its stance, stating that tokens had become a de facto “part of the financial system.”
Meanwhile, Izvestia, a Russian news site, highlighted some of the legal barriers that now stand in the way of companies and individuals who wish to engage in crypto on a more open basis.
The president of the crypto exchange giant Binance in Eastern Europe, Gleb Kostarev, was reported in the media source as saying that “so far, the position of cryptocurrencies” in Russia is “very unclear.”
Meanwhile, a lawyer who specialises in cryptography has been cited as saying that crypto-related semantics are producing unneeded issues.
He cited a Supreme Court judgement from 2019 that advocated the use of a phrase that may be interpreted as “virtual assets” – similar to the language used by organisations like the Financial Action Task Force (FATF). The government, on the other hand, has subsequently embraced the more “confusing” phrase “digital currencies,” leaving “everyone” in the dark about what it is talking about when it passes legislation. “Digital currencies” might refer to coins issued by central banks or even digital assets.
Courts were also confused about how to proceed in bankruptcy cases where the corporation or person declaring bankruptcy holds crypto, according to another industry participant. Judges have been forced to traverse intricate property rules as a result of crypto’s lack of formal recognition as an asset, frequently setting potentially harmful legal precedents in the process.
The experts also mentioned that Russia’s single crypto-related regulation currently prohibits the use of cryptocurrency in payments, but that this might occasionally obstruct legitimate token sales. The rule also has implications for the sale of non-fungible tokens (NFTs) in the art world, where several Russian companies are attempting to establish themselves as important participants.
Because NFT sales rely on blockchain protocols, they invariably necessitate the exchange of tokens for a digital commodity, which is technically illegal. Some businesses have already done so, such as the Hermitage Museum in Saint Petersburg, which sold a number of its masterpieces in August.
In order to stay on the right side of the law, the museum was obliged to route funds to “overseas” places, according to the lawyer.
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