Possible Criminal Sanction for Cryptocurrency

News and Analysis

According to Interfax, last week Russian government held a meeting concerning draft law on responsibility for issuance of money surrogates and operations therewith.

Following the results of the meeting, the Ministry of Finance and other entities were recommended to work through the issue of reasonability to introduce criminal responsibility for issuance of money surrogates, including cryptocurrencies, creation and distribution of software for the purposes of issuance thereof, and for operations using money surrogates in cooperation with the Central Bank.

Moreover, the Ministry of Finances proposal to introduce a legal procedure for pre-juridical blockage of sites providing issuance of cryptocurrency was approved. A draft law on recognition of cryptocurrencies, including Bitcoin, as money surrogates has been in development for more than a year, however, any criminal responsibility was excluded at its early stages.

The legislators proposed to introduce administrative responsibility including penalty fees. Alexei Moiseev, deputy minister for finance, declared in September, 2014, that the ban will be effective as of spring 2015, however, it never happened. Russian Ministry of Economic Development initially presented negative resolution to the said draft law, however, following several amendments, it changed its decision to positive, though provided some comments. Meanwhile, Vladimir Putin spoke of cryptocurrencies usage possibility, and month before that Russian Central Banks chairwoman Elvira Nabiullina said that regulation prevailed ban.

Anyway, this September the cryptocurrency issue started circulating again following QIWIs statement of intent to issue their own cryptocurrency dubbed bitruble. Soon after that the previously declined proposal to introduce criminal responsibility for work with cryptocurrencies returned to the table.

Marina Gurieva, HSEs Innovative Center Deputy Executive officer and Bitcoin Foundation member said:
The proposal to ban cryptocurrencies on the background of growth of interest for decentralized autonomous systems in all progressive countries, and activation of block chain research and probable application of that technology in a wide range of industries, just causes raising of eyebrows.

Cryptocurrencies, along with internet of things, machine learning, driver-less cars, and other advanced technologies are indicated on Gartners cycle. Therefore, in terms of technology, block chain systems certainly have prospects of development. Potential of block chain technology is enormous.

Trustless and cryptographically secured distributed ledgers of transactions allow one not just to optimize financial services like payments, cross-border remittances, crowdfunding, or issuance of shares and debt securities, but also to provide government services (British government is already considering transferring of various ledgers to block chain from land ownership to pub licenses), implementation of internet of things (IBM, apart from ADEPT, is developing a new block chain based system to implement so called smart contracts), etc. According to some assessments, implementation of block chain technology may result in annual business savings up to 550 billion USD.

Prohibitive position of Russian authorities concerning cryptocurrencies instead of pro-active research position inherent in regulating entities of the USA, Great Britain, Australia, Switzerland, and other countries, will most likely result in necessity of borrowing successfully launched and implemented things from the West in medium and long term. It happens not for the first time (earlier it was cars, computers, credit cards, etc.). One may just ask, whether it is the actual goal for those willing to pass the prohibitive resolution today.

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