The Russian government and the country's central bank have reached an agreement on how to regulateand other cryptocurrencies in a plan to recognize digital assets as a form of currency.
According to a document published on the Russian government official website on Tuesday night, a draft law is expected to be introduced by February 18.
"The circulation of such financial assets will be regulated by the state with strict obligations for all participants in the professional market and an emphasis on protecting the rights of ordinary investors," reads the document.
According to the local business publication Kommersant, the new legislation would bring cryptocurrencies into the same regulatory framework as foreign currencies.
However, it would require the Russian government to pass new laws and directives, something that could happen as early as the second half of 2022 or early 2023.
The proposal suggests that cryptocurrency purchases in Russia must be conducted only through licensed and locally registered companies with full user identification.
In other words, the new legislation will allow banks to operate as intermediaries between users and crypto trading platforms.
Exchanges and peer-to-peer marketplaces offering crypto trading services will also have to register as legal entities in Russia, which means opening accounts with authorized banks and satisfying all the requirements normally applied to traditional financial institutions.
Tracking user transactions
In addition, the new law will oblige foreign crypto exchanges to set up a separate office in Russia.
Both local and foreign companies will have to check transactions for signs of illegal activity and to keep user transaction data for at least five years.
Should the draft law be adopted, all cryptocurrency transactions over 600,000 rubles (about $8,000) would have to be declared with the Federal Taxation Service (FNS). Failure to do so could be considered a criminal act.
Remarkably, the proposal suggests that banks working with crypto exchanges would not be able to use blockchain analytics tools offered by companies like Chainalysis or Elliptic.
Instead, they'll have to use the tracking tool developed by Russia's Federal Financial Monitoring Service (Rosfinmonitoring).
Per the document, this tool, called the "Transparent Blockchain," can help identify owners of cryptocurrency wallets and is capable of collecting information from the darknet, identifying patterns of illegal use of digital assets.