The Russian Stand on Bitcoin is Anything but Clear

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LONDON (InsideBitcoins) — With most EU member states in agreement that Bitcoin requires not only regulating but that all trading and mining should be subject to VAT- there are at least two European countries that are taking different views. As Inside Bitcoins reported yesterday the U.K. has indicated that it intends to become a centre of bitcoin activity but over on the other side of Europe, Russia has taken a far more militant position.

The currency has suffered from a generally lukewarm reception in Russian political circles for some time and the latest move appears to be a confused approach to tackling its use. With a complexity that is not inconsistent with traditional Russian political mechanics, the status of Bitcoin has fluctuated over the years and at times it seems that even a retrospective re-writing of the rules of engagement is not out of the question.

A definite ‘no’ — or maybe

The use of all cryptocurrencies in Russia were prohibited in February of this year with Reuters reporting that officials issued warnings  that “Russian law stipulates that the rouble is the sole official currency and that introducing any other monetary units or substitutes was illegal.”

Citing the possible unintentional consequences of bitcoin users being dragged into illegal activities, which according to Russia’s Central Bank included the laundering of money and the financing of terrorism,the criminalisation of Bitcoin was seen by some as a response to the then emerging geopolitical crises in the Ukraine, as Inside Bitcoins reported last month.

And yet, there were signs in July that Russia was not only softening its stance but that what had seemed like an unambiguous position in February had in fact been something of a misunderstanding. The strict prohibition of Bitcoin had in fact, never occurred.

According to an article in the Wall Street Journal the Russian bank announced that it would not hamper use of Bitcoin in Russia. The statement dismissed the earlier ban by indicating that the meeting in February had only intended to“develop a unified approach to the determination of the legal status of cryptocurrencies,” and that the position of the meeting was “not to prohibit all operations related to cryptocurrencies.”

The same report indicated that the main goal was the preparation and realization of a complex set of measures designed to prevent “the use of cryptocurrencies in illegal operations, including those related to the legalization (laundering) of proceeds from crime, as well as improving the regulatory framework to protect the rights of citizens and organizations using cryptocurrencies.”

A ban again

Which is perhaps why it came as such a surprise that  Russian news agency RIA Novosti reported at the beginning of this month that a draft law from Russia’s finance ministry clearly indicated that the currency’s legal status in the country was anything but ambiguous.

Limitations to be imposed via the new legislation included a ban on the use of alternative currencies as a means of payment or for exchange with Roubles, criminal liability for the production of ‘monetary surrogates’ and restricted access to information on the development of said surrogates.

One thing however remains clear; the legislation is at the draft stage only and within the current political regime in Russia draft legislation should be viewed with an understanding of the volatility that permeates Russian government. Policies can change very rapidly to accommodate the vicissitudes of political necessity. Right now the future of Bitcoin in Russia looks bleak. What it will look like tomorrow is anyone’s guess.

Ian Jackson is an Inside Bitcoins correspondent based in the U.K.

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