The Russian Ministry of Internal Affairs and other law enforcement agencies are formulating proposals to allow the confiscation of cryptocurrencies. By December 2021, these proposals could materialize into Russian laws.
From a translated report by RBC, seizure and confiscation of virtual assets is intended to be put into law. The specific agencies in the formulation team are Rosfinmonitory, the Prosecutor’s General Office, the Investigative Committee, the Justice Ministry, the Federal Customer Service and the Federal Security Service. The Supreme Court will also be participating.
This new regulation is vague as to how enforcement should be carried out. Cryptocurrencies are intangible, non-divisible and blockchain-based assets that are rather difficult to seize and confiscate.
It is surprising how the Russian government intends to put this directive into law, when it has been involved in blockchain and cryptocurrency-based initiatives. The Russian populace also has a positive attitude to cryptocurrencies.
The actions of President Vladimir Putin and his aides have given confidence in the support of government towards the use of digital currencies. For example in June 2017, the President met Vitalik Buterin, founder of Ethereum.
In that same month, he attended the St. Petersburg International Economic Forum where he claimed that with the adoption and acceptance of innovative technologies, the Russian economy can be enhanced and the average income can be increased.
Lastly is the leasing of an abandoned aluminum plant located in northern Russia to a Bitcoin mining company by one of Putin’s aides.
Regulation around cryptocurrencies in Russia has not been smooth. Fontana reported that in May 2019, regulation of cryptocurrency was dismissed by the Russian Prime Minister Dmitry Medvedev. In the same conference attended by President Putin, Dmitry explained that cryptocurrency may have lost its appeal to the masses.
The need for regulation would be most urgent when prices of cryptocurrency rose, especially concerning Bitcoin which surged to $13,500 in June 2017. This price movement didn’t cause the Russian government to blink as many expected.
2019 is the year cryptocurrency regulation came to fruition. Due to the pro-cryptocurrency events and meetings made by President Putin, Russia’s digital rights act was born. It defines smart contracts and digital tokens in a legal sense.
The current relationship between cryptocurrency and the Russian government has been fading. This is largely attributed to the increase in high-profile crimes in the country.
A man ordered he be paid 50 BTC or he would blow up several train stations across the country with set explosives. The Police in St. Petersburg reportedly got his anonymous letter on November 4 2019.
In October 2019, Sarov nuclear plant was at risk from hackers and external threats because Denis Baykov and his two workers used the facility’s supercomputer to mine Bitcoin. He was fined $7,000.
Contrary to the methods of banning and regulating crypto used in China and India, Russia is reversing its progress through complete oversight and control of the use of crypto.
Daily Rich CEO, Konstantin Golikov, explained to RBC that classification of digital assets is first required before the government undertakes to confiscate cryptocurrencies. The country will reluctantly enable crypto-based businesses to thrive.
The digital rewards platform co-founder, Konstantin, further said that law enforcement agencies are actually legalizing cryptocurrency in Russia by discussing the forfeiture of cryptocurrency. The Russian Central Bank might run but it can’t hide from the many precedents for cryptocurrency seizure by a court decision.
As iterated previously, implementation of this new regulation is vague and needs clear direction on how to overcome secretive private key ownership and protection of personal exchange account passwords that protect funds stored in wallets and exchanges respectively.
To get a hold of these assets, the government may need to cooperate with asset holders.