Three People Arrested in Russia for Illegally Trading Bitcoin

News and Analysis

Last week, Russian police arrested three men for illegally trading in 500 million rubles worth of bitcoin, or around $9 million worth of the cryptocurrency. Arrests were made approximately 260 miles northeast of Moscow in the city of Kostroma. 

The arrest marks the start of the first-ever criminal case against bitcoin sales in Russia, Vedomosti business daily reported last Friday.

According to Ministry of Internal Affairs press officer, Irina Volk, those arrested illegally cashed the millions in bitcoin and are being brought up on charges of “Illegal Banking”.

The operations came to light after investigators found an unusual amount of activity in bank accounts stemming from 300 bank cards and sim cards used to store the digital currency. The money was being shifted into different accounts owned by family members, prosecutors believe.

A legal framework for bitcoin in Russia is still being devised by the country’s various central and financial authorities, but no concrete regulatory proposals have been put forth at this time. All of this could slow the process of ultimately legalizing the transfer of bitcoin into rubles. The political will exists to make it happen, but Russia is as keen as showing it can bust money launderers as it is showing that it’s a player in the new-digital economy.

There have been cases in the past when Russian courts have blocked bitcoin exchanges and websites where people could have traded the cryptocurrency to rubles, but last week’s arrests marked the first time that Russia has lodged criminal charges against individual people.

The arrests also come on the heels of reports that the government is looking at restricting its citizens’ access to cryptocurrencies under the guise of consumer protection. Last week, Russia’s Deputy Finance Minister Alexei Moiseev suggested that rather than a currency, bitcoin should be regulated as an asset and should be restricted to “qualified investors.”

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