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