Russia To Criminalize Non-Custodial Crypto Wallet Holders

A group supposedly representing the interest of Russian banks has proposed a crypto-related bill to Russian authorities. The group wants the Russian government to make it a criminal offense for anyone to own private crypto wallets. Even though the financial regulators are set to discuss the idea, industry analysts opine that it is nearly impossible for the bill’s proposal to be implemented.

The Association Of Russian Banks Proposes A New Crypto-Related Bill

Earlier in the week, the deputy chairman of the association of Russian banks, ABR (Anatoly Kozlachkov), was interviewed by Izvestia (a local media outlet). When the interviewer asked Kozlachkov for a long-term solution to the issues of foreclosure and seizure of digital assets, he said, “the government should make it a criminal offense for anyone to store their digital currencies in non-custodial wallets.”

Kozlachkov further revealed that the ABR had made this suggestion known to the authorities via a written proposal detailing how the idea could work. The ABR vice chair added that they proposed that the internal affairs ministry should be responsible for ensuring that no one violates this policy once it comes into full effect. Then, he said the association would work on ensuring that no one refuses to release their wallet keys when the appropriate bodies ask them to do so.

Part of the proposed bill states that non-custodial wallets here refer to user-controlled crypto wallets and not the wallets owned by users with crypto exchanges. Suppose the appropriate regulator discovers a link between a debtor and a digital asset wallet. The agency will ask such a debtor to choose whether to release its crypto wallet keys or be penalized for withholding useful information from the government in terms of hiding their crypto wallet worth.

The ABR opined that their proposal has two benefits. Russia can prevent cash outflow using crypto. The other benefit is that the authorities can control how digital assets are circulated in the country. However, the banks clarified that an effective foreclosure system over private crypto wallets would be needed for this proposal to become effective.

Asides from sending a copy of the proposal to Russia’s apex bank, the bankers’ association also sent copies of the proposal to the nation’s financial regulators (Rosfinmonitoring) and the central bank of Russia. When the media reached out to Russia’s apex bank for any official statement, it declined comments. However, Rosfinmonitoring told the media that the proposal is a good development.

A Contrary Suggestion

Nevertheless, top crypto players and some legislative members (especially the ad-hoc committee on crypto regulation) have condemned the idea. A committee member, Andrey Lugovoy, claimed that while the ABR has good intentions, their proposal could prevent the legalization of crypto among Russians. A Professor from one of Russia’s reputable universities (Roman Yakovsky) added that there are no tools that can be used to identify private crypto wallet holders. Hence, it would be nearly impossible to seize their digital assets.

He suggested that a better alternative would be to issue fines for those found guilty of evading tax by hiding their assets in digital assets.

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