The Association of Banks of Russia (ADB) recently released a report in which they ask for greater visibility of people’s cryptocurrency possessions. This way, creditors would be able to recover their funds from crypto owners who hide their wealth.
The need for stricter laws
According to ADB vice president Anatoly Kozlachkov, the existing rules don’t create a legal framework for a working relationship between Russian banks and cryptocurrency. The gaps in the legislation allow indebted people to hide their funds in Bitcoin or other cryptocurrencies. This approach leaves no opportunity for creditors to get their funds back.
Kozlachkov talked about the need for legal tools that would enable banks to work with cryptocurrency with greater benefits for financial organisations. The bank association thereafter came up with a proposal for a special programme that permits banks to identify cryptocurrency owners.
In the report, ADB also speculates on the fact that Russian intelligence already has the tools necessary to identify how much cryptocurrency every user owns. What banks want is to make such tools legal. This would allow creditors to use the data on cryptocurrency owners in court.
According to Russian business newspaper Kommersant, some sources confirm the theory, but the identification could be possible for as little as 1% of cryptocurrency investors.
It’s still bad news for crypto investors who largely appreciate the anonymity associated with blockchain technology. At the same time, the new Russian bank cryptocurrency framework would create a precedent for other governments looking to gain more control over the cryptocurrency environment.
A two-stage procedure
ADB requests that the procedure be carried out in two different stages.
During the first step, banks should be allowed to develop special programmes that enable them to identify cryptocurrency owners. Banks want to know whether users own Bitcoin or not. They would also like access to the exact amounts in their wallets. This information would give authorities a full view of a debtor’s possessions.
Somewhat alarmingly, the report doesn’t appear to stipulate any limitations on who gets to access such data. The report regarding Russian bank cryptocurrency issues uses pretty general terminology and leaves room for interpretation. In ADB’s current scenario, anyone could inspect another person’s digital assets.
The second step is in regards to using the information in court as proof that a debtor has the funds necessary. In this stage too, the regulations proposed by ADB leave room for abuses. The new Russian bank cryptocurrency law could even force crypto owners to reveal their private keys to creditors if a judge asks them to do so.
New possible Russian bank cryptocurrency rules
The fact that Russian banks want visibility of cryptocurrency owners could have a series of consequences on crypto adoption in the country. The implementation of such rigid regulations could hamper opportunities for crypto investors and slow down blockchain development in Russia.
Moreover, while the ADB framework may streamline bankruptcy and taxation procedures, its current form lacks a series of elements that protect cryptocurrency owners. In simple words, the price to pay by the end-users would be the lack of anonymity – one key feature many users appreciate.
Russia has been working for some time now on an innovative legal framework for Russians to use Bitcoin and other digital coins in everyday life. Adding ADB’s proposal to the table may be a step back in creating cryptocurrency-related regulations that encourage usage and adoption.
ADB is a non-governmental organisation, so it still remains to be seen whether the State Duma will take the report into consideration. ADB includes most of the leading banks and financial institutions operating in Russia. However, Sberbank and Alfa-Bank, both known for their interest in cryptocurrencies, aren’t members of ADB.
While anonymity isn’t a primary goal of blockchain technology, many users appreciate the ability to remain unknown on the network. The framework proposed by ADB could influence Russians looking to invest in crypto assets.
What may seem like a way to create a legal framework for people to invest and pay taxes could turn into an instrument to control people’s money – which is precisely what the concept of Bitcoin aimed to avoid.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.