The Bank of Russia, the Central Bank of the Russian Federation (C.B.R.), has released a warning yesterday to all citizens and legal entities in the country regarding the use of “so-called virtual currency, in particular Bitcoin.”
The announcement opens, like many other warnings issued by central banks in recent months regarding digital currencies, mentioning that they are unregulated, speculative and carry a high-level of risk. But the Russian warning goes a step further than most, warning that the mere use of Bitcoin by itself might be illegal.
According to the announcement, the central bank warns both ordinary citizens and businesses, primarily credit institutions and non-credit financial institutions, of the use of virtual currency in exchange for goods, services or cash in rubles or foreign currency, as it might be illegal under the law.
The C.B.R. states that according to article 27 of the Russian Federal Law regarding the Central Bank of the Russian Federation, issuing of “monetary surrogates” is prohibited. The bank adds that due to the anonymous nature of the production of virtual currency, with the unlimited range of actors who can use them for transactions, citizens may be unintentionally involved in illegal activities, including the laundering of proceeds from crime and terrorist financing.
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In case someone might argue that no one is issuing Bitcoins per se, or that the bank announcement only warned of the potential problem with money laundering, the bank reiterated its position by concluding: “The Bank of Russia has warned that Russian legal entities providing services for the exchange of “virtual currency” in rubles and foreign currency, as well as for goods (works, services) will be considered as a potential involvement in the implementation of suspicious transactions in accordance with the legislation on counteraction to legalization (laundering) proceeds of crime and financing of terrorism.”
Last December a ban by the Bank of China caused the price of Bitcoin to crash about 50% overnight. It is unlikely the Russian move will make a big effect on the Bitcoin market as ruble to BTC transfers do not comprise a big enough share of the total transactions globally. For example, ruble trading accounted for just 2% of all trading at BTC-E, the largest Eastern European exchange, over the past month.
Commenting about the C.B.R.’s statement, Timur Latypoff, Founder of Timur Latypoff Technology Lab, whose firm provides broker services including bitcoin to MT4 feeds, told Forex Magnates that, “The Central Bank obviously advises Russian companies to refrain from using Bitcoins and threatens with possible terrorism charges to back up the advice. This means that not only there will be no Russian bitcoin exchange, bank or brokerage, but also no local e-shops will be able to sell goods for BTC, which will further diminish the minor role of Russia in Bitcoin world.”
In terms of whether companies will comply, Mr. Latypoff added, “I believe everyone will, because the threats are quite real. It is cheaper to operate as a non-Russian company than to bear the risk. And since Bitcoin has no borders anyway, there are not many reasons to do otherwise.”