Russia’s Central Bank Proposes New Token Framework While Considering Crypto-Transactions as Suspicious

This bank has a platform that allows users to tokenize assets, including currencies, although the sale and purchase of cryptocurrencies could be considered suspicious activity.

The Central Bank of Russia (CBR) has formally proposed a legal framework for tokenization but also plans to label cryptocurrency transactions as suspicious activity.

The information was known through a press release issued by the bank. In the release, the financial institution explained that it has a platform that allows users to tokenize assets, including currencies to issue them to investors.

Ivan Zimin, Director of the CBR’s Financial Technology Department, said in the release that the bank had now proposed using the platform as a framework in the country’s upcoming cryptocurrency law, which will act as guidance for legitimate businesses wanting to tokenize assets.

“Based on the results of the piloting, the Bank of Russia proposed to include in the draft federal law On Digital Financial Assets the provisions necessary for the introduction and development of such decisions in the emerging digital assets market, which were supported by government bodies and businesses”, Zimin said.

Suspicious Operations

But both the sale and purchase of cryptocurrencies could be considered suspicious in the new guidance of Russia.

Local media reported that the CBR is planning to update on the bank guidance what is or not a criminal activity.

As part of the proof of concept, which still undergoing in-house assessment, the guidance would ask commercial banks to flag activity and authorizes them to block the transactions they consider as “suspicious”.

CBR’s move has been met with some pushback from industry figures. Don Guo, CEO of Technology and liquidity provider Broctagon, has criticized the fragmented approach.

“Russia seems to have taken one step forward and two steps back when it comes to crypto”, Guo said. He added it would leave “Russian traders scratch their heads” as other major economies in the world.

“Where China has been advocating for Bitcoin and creating its digital currency, other countries like the US seem to be fighting a losing battle to squash it”, Guo said.  He also considered that whether regulators like it or not, the adoption of digital currencies will continue so “dismissing cryptocurrencies comes with an opportunity cost”.

Regulating Cryptocurrencies as ICOs

Since 2017, the Russian government has been drawing up a bill that would regulate cryptocurrencies and related activities such as initial coin offerings (ICOs) and trades with fiat currencies like the ruble.

Although officials previously indicated the bill was nearing completion, Binance CEO Changpeng Zhao, hinted in a speech last October that Russian officials were being indecisive.

Local media suggests Russia is now trying to create a regulatory distinction between asset tokenization.

Other Inconvenience

Last October, the CBR backed a potential ban on cryptocurrency payments, claiming they represent significant risks and could not be equated with legal tender.

As it was reported, one of the largest projects to ever come out of CBR’s regulatory sandbox since it launched in April 2018, the tokenization platform was developed by Nornickel, a Russian mining and smelting company.

It also allows organizations to mint “hybrid tokens” backed by different assets simultaneously. The platform will go into operation once Russia’s cryptocurrency bill passes into law so all these changes could be considered. Using tokens would be something allowed, but financial institutions will be careful with the use of cryptocurrencies and with related transactions.

By María Rodríguez