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Russia vs Bitcoin - The New Cold War
By Shane Addinall Oct 04, 2020 LegalityBinance was hit with the news that it has been blacklisted in Russia since June 2020. Is this a necessary action or proof that despite “new regulations” Russia is still ardently opposed to crypto-technology and the freedom it represents?While cryptocurrencies such as Bitcoin, Litecoin and Ethereum have proven to be lifesavers in countries ravaged by hyperinflation and crumbling local economies it also has its fair share of detractors.
In some cases, these detractors voice concerns over its use for illegal trade or its volatile nature. However, often the real concern comes from government bodies who are not comfortable with a mechanism that allows residents to store up wealth where they are unable to claim a share through heavy taxation.
Heavy-Handed Approach
Russia is one such region.
In direct conflict with the free-trade, open market, user-driven dynamic that underpins crypto coins, Russia is determined to force the virtual currency to fit into its current fiat currency constraints.
Article 27 of Russia’s Federal Law on Banking does not allow for the introduction of new currencies or monetary substitutes within Russia’s borders. For this reason, Russia has labelled digital coins as “taxable property” and as such their ownership needs to follow property ownership rules.
This entails:
- Providing local authorities with all digital wallet addresses
- A full history of transactions
- A current balance
Cryptocurrency users who fail to report accounts which receive more than $13,000 per annum stand to face up to 3 years in jail.
As to how Hodlers would be caught given the extreme privacy of blockchain transactions, the current law requires over-the-counter (OTC) cryptocurrency dealers to supply them with up to date reports on all transactions from Russian IP’s or which were made using Russian Rubles.
The New Cold War?
To say that the Russian government by enlarge is opposed to cryptocurrencies and the financial freedom they represent is an understatement.
The first draft of the Digital Assets bill which President Vladimir Putin was due to sign into law made it illegal to issue and trade cryptocurrencies in the country. After massive pushback from both the digital trade community and the Ministry of Justice and Ministry of Economic Development, the bill was redrafted in July 2020 to allow crypto-trading under Russian property ownership laws.
This all came to a head in September 2020 when international cryptocurrency trading platform Binance was notified that it had been blacklisted by Russian internet censorship agency Roskomnadzor. A decision which had apparently already been approved on June 2nd, 2020.
The reason for their backlisting is noted in the court document as the fact that they disseminated information about and facilitated the sale of “monetary surrogates” in Russia.
What is strange about the notice is that it is being upheld by a court ruling that states:
"Issuance and usage of bitcoins are fully decentralized, and there is no way to regulate it by the government, which contradicts the current Russian law"
However, this stance was revoked in July 2020 when Putin approved the new bill which states that companies can issue digital currencies if they are registered with the Bank of Russia as an approved issuer.
No Sense of Reconciliation
What is more astounding is that there has been no communication with Binance about how to go about getting the ruling overturned given that under the current law Binance is operating legally.
Rather they were simply notified that they were deemed an illegal operator and required to cease doing business with Russian residents.
Binance Russia director Gleb Kostarev has made a public statement confirming that they will be following the necessary legal channels to dispute the blacklisting and restart trading as soon as legally possible.
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