Depending on the jurisdiction, cryptocurrency regulation has largely been the turtle in this race. Widely criticised by many and anticipated by others, slowly and surely, countries and regulators are gaining pace with the hare. A few days ago, Russia became the latest country to set a deadline for cryptocurrency regulation. But what – if anything – does this mean for the industry at large?
Is Russia a key player in the cryptocurrency scene?
There are certainly a lot of enthusiastic Russians in the cryptocurrency space, both developers and investors. The ruble may not be as volatile as the lira or the Venezuelan peso, but the country’s politics often make up for that. It isn’t too surprising that 13% of the Russian population use cryptocurrencies of some kind.
Throughout 2016 and 2017, Russia seemed to be a major player in the cryptocurrency space. Then it also became a paradise for scammers. One fake ICO too many and regulators took notice. While it didn’t outright ban ICOs, it did make them harder to do.
With a few too many stipulations to contend with and raised public awareness over investing in scam ICOs, Russian enthusiasm in cryptocurrency waned, and its start-ups set up shop in safer pastures like Switzerland and Singapore.
Putin sets a deadline for cryptocurrency regulation
But now, President Vladimir Putin has placed a deadline on cryptocurrency regulation in the Russian Federation. By July 1st 2019, the Russian ruler wants to clear up ambiguity surrounding the cryptocurrency community in his land, and Kremlin.ru issued a document to the Federal Assembly stating as such.
Without diving too deeply into the structure of Russian politics, what the document essentially decrees is that both the upper and lower parliamentary houses must reach a decision and adopt a set of regulations for digital assets within this time frame.
What will this mean for cryptocurrency regulation in the country? Well, Putin has actively stated that he is not against cryptocurrency. In fact, the main goal of the regulation is meant to achieve a framework in which blockchain companies can flourish and help breed innovation in the country.
As such, the regulations are unlikely to pinpoint just one sector of blockchain technology, such as ICOs, but rather look at the industry holistically, taking into account digital financial assets and ways to boost the Russian economy.
In short, this should be bullish for cryptocurrency in Russia and will allow the country to stop sending innovation offshore. It should also ensure that Russia doesn’t end up lagging behind in the blockchain race.
How will cryptocurrency regulation take shape in Russia?
Cryptocurrency regulation is a mixed bag in Russia. There are many who believe that companies cannot operate in a lawless environment. But there are plenty of others who believe that blockchain technology is still nascent and that over-regulating this area will stifle innovation.
Just recently, Alexander Konovalov, the Minister of Justice of Russia, stated his concerns over the fact that the industry is too immature to regulate.
He feels that detailing a list of stipulations and requirements may be prohibitive to technological advancement, especially as digital assets are not recognised as a means of payment in Russia.
On the other hand, the Russian banks have been famously anti-cryptocurrency. Andrey Kostin, head of VTB, Russia’s second-largest bank, even likened cryptocurrency mining to money printing.
He vehemently believes that cryptocurrency cannot be seen as something legal to trade on the stock market, for example. His stance is that this asset class becoming mainstream would be dangerous for the financial market.
It’s far from certain how cryptocurrency regulation in Russia will play out, but it is certain that some form of regulation will take place by July 1st.
What does this mean for the industry?
Many industry insiders believed that 2018 would be the year of cryptocurrency regulation. To a certain extent, it was. We saw trailblazing countries like Malta passing new laws on ICOs, exchanges, and DLT. We also saw a commitment from the country’s Prime Minister Joseph Muscat to make blockchain and other emerging technologies a key focus of the country’s economic growth.
However, in the US, regulation is still dragging its heels. It’s beginning to take more shape on a state-by-state basis, rather than at a federal level. And everyone is still waiting to hear the SEC’s ruling on the Bitcoin ETF proposals.
Moreover, 2019 is the year that the international body for anti-money laundering, the FATF, will come out with clear guidelines that all member countries must follow. This means that any exchange or wallet provider in these areas must implement KYC and AML.
And now that Russia has set a date for cryptocurrency regulation, this may have some effect on the industry, as countries look to each other to find the right way forward. Germany also announced last week that it will decide on cryptocurrency regulation by the middle of this year. South Korea is also close to establishing clear guidelines.
Whether Russian regulation, German regulation, and decisions from the SEC will be bullish or bearish for crypto remain to be seen. But the point here is that global regulation is finally starting to come – whether it works with or against the industry will be key.