Central Bank of Russia (CBR) proposes legal Framework for Tokenization ignoring Cryptocurrencies


In its latest on Monday, the Central Bank
off Russia CBR has announced that it has piloted a platform to tokenize the
real-world assets, equities, and currencies.
375-P Protocol Amendments proposal
As per the press release by the Central
Bank of Russia, it has sent the key 375-P protocol amendments proposal to the government.
The 375-P protocol is the document that frames the anti-money laundering policies.
This protocol has not been amended since
2012, but if the latest amendments are passed, the consequences could be deeply
substantial.
As per these amendments, the banks will get
the power to use the anti-money laundering regulations (AML) to identify the
accounts with ‘suspicious activities’. They can further use this information to
decide the future of the account whether to freeze it or close it.
Ivan Zimin, Director of the CBR Financial
Technology Department elaborated that Central Bank has proposed a
cryptocurrency regulatory framework through the platform that will be vigilant
while tokenizing the assets.
Zimin quoted, “Based on the results of the
piloting, the Bank of Russia proposed to include in the draft federal
law," on digital financial assets" the provisions necessary for the
introduction and development of such decisions in the emerging digital assets
market which were supported by government bodies and businesses."
According to the media reports, if the
amendments are passed by the Russian government, it will put the trading of
cryptocurrencies under suspicious activities. The Framework is still under in
house assessment and before finalizing the regulations, the guidance would seek
the opinion of the commercial banks about flagging the crypto activities which
will authorize them to block the suspicious transactions and even closing down
any such accounts.
Concerned Response from the Russian
Crypto Community
Although the proposal has not been approved
by the Government, it has created ripples among the Russian crypto community.
The Central bank of Russia (CSR) is getting concerning reactions from the
Crypto industry and the finance industry.
While criticizing the decision Don Guo, CEO
of technology and liquidity provider Broctagon, said that the approach of the
CBR is biased and it will create more uncertainty and chaos in the digital
asset space. He added that Russia seems to have taken one step forward, two
steps back when it comes to crypto.
He further said that the Russian traders
would be ambiguous as other major economies like the U.S and China are already
offering contradictory advice about the regulations of cryptocurrencies.
Where China has been advocating for Bitcoin
and creating its own digital currency, other countries like the U.S seem to be fighting
a losing battle to squash it. He added that whether regulatory bodies like it
or not but the adoption of digital currencies is going to happen and ignoring
the cryptocurrencies will be losing the opportunity.
Since 2017, the Russian Government has been
into the process to bring cryptocurrencies and Initial Coin Offerings (ICOs) under
regulations and also the trading including the Ruble. In October 2019,
indications from the government officials’ implied that the amendment bill is
in the final phase in however in the same month, Binance CEO Changpeng Zhao had
signaled that the Russian government has been indecisive on this matter.
In the same month, the Russian government
passed another Digital Rights Bill that structured legal definitions of smart
contract and cryptocurrencies apart from outlining the basic digital rights.
Russia inclined towards Banning of Cryptocurrencies
The latest news indicates that Russia is
trying to establish a regulatory distinction between tokenization integrating
it seamlessly into the financial laws while separating cryptocurrencies from
the financial legal structure.
In another development in October 2019, the
Central bank of Russia had supported a ban on cryptocurrency payments claiming
that they involve risks and could not fit in legal tender.
A platform for tokenization projects has
been developed by Russia’s major mining company Nornickel. This platform which
is owned by Vladimir Potanin wants to introduce tokenization of the metal
commodities.

Jayashree Ingle
CBW - External Analyst
INDIA