Russian Minister: Cryptocurrencies Need Not Be Clearly Defined Under Current Regulations

Omar Faridi

Alexander Konovalov, a prominent lawyer and Russia’s Minister of Justice, has confirmed that the Russian Federation’s constitution and laws regulating the nation’s traditional financial system “categorically prohibit the use of the cryptocurrency as a means of payment.”

Konovalov’s remarks came during the government hour which is a meeting regularly held in the country’s Federation Council. According to local news outlet Tass, a proper regulatory framework for digital assets may not be introduced anytime soon.

Citing Article 75 of Russia’s constitution, which states that Russia’s reserve bank is the only financial institution in the country that can issue legal tender (in the form of Russian rouble), Konovalov clarified that introducing or issuing other types of currencies is prohibited.

Although cryptocurrencies may not be (legally) used as a medium-of-exchange (MoE), Konovalov said digital assets may be classified as “other property” under Russia’s existing regulations. However, the experienced politician and lawmaker noted that it’s currently not necessary to clearly define the concept of cryptocurrencies.

Russia's Stance On Financial Digital Assets Remains Unclear

Similar to other jurisdictions such as India, the Russian government’s stance on digital assets remains unclear. Last month, the nation’s Ministry of Economic Development had drafted a new law to permit certain commercial entities (from the IT and blockchain industry) to conduct financial transactions with cryptoassets.

In mid-January 2019, Anatoly Aksakov, the head of Russia’s State Duma Committee Financial Market, had stated during a press conference that the country was planning to adopt several bills related to regulating the country’s digital economy. According to Tass, Russian authorities were also considering introducing legislation concerning the use of cryptocurrencies in financial transactions.

Aksakov explained (last month) that Russian lawmakers had agreed the bill on digital financial assets should also include regulations for using cryptoassets in crowdfunding, or initial coin offerings (ICOs). Notably, legislation pertaining to the business activities of e-commerce platforms had also been scheduled to be introduced by February 15th, 2019.

Should Not Dismiss Cryptocurrencies Because Prices Have Dropped

Russian Federation prime minister, Dmitry Medvedev had said in January that cryptocurrencies were still “interesting” - even though their prices had dropped significantly. Medvedev had argued that a decline in the value of digital assets was “not a reason” to stop following their ongoing development.

The Russian prime minister’s comments came during a speech he delivered at the Gaidar Forum, a major economic discussion event held in Moscow (Russia’s capital). He remarked: 

I’ll remind you that at our last meeting here, at the Gaidar Forum, we also talked about how good and interesting this all is, and so, since then, the cost of some cryptocurrencies, as we know, has fallen five times. But this, certainly not a reason to bury them … there are both light sides and dark sides, as in any social phenomenon, in any economic institution. And we should just carefully watch what happens to them.