Putin Backs Cryptocurrency Rules and Warns of ‘Serious Risks’

  • Leader, top finance officials hold first meeting on issue
  • Central bank, Finance Ministry differ on approach to rules

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President Vladimir Putin called for regulation of cryptocurrencies but stopped short of backing a broad ban as a debate rages over how Russia should handle the increasingly popular financial instruments.

“The use of cryptocurrencies bears serious risks,” including money laundering, tax evasion and funding for terrorism, Putin told a meeting of top finance officials including Bank of Russia Governor Elvira Nabiullina, Finance Minister Anton Siluanov and Kremlin economic aide, Andrey Belousov, in Sochi Tuesday.

Putin called for building a “regulatory environment” based on international experience that would defend the interests of business and the state, as well as provide legal guarantees for those using the instruments. “It’s also important not to put up too many barriers.”

The session was his first such meeting with the three financial officials on the topic. Enthusiasm for digital currencies in Russia has been growing and the Finance Ministry has called for legalizing them. The central bank has expressed concerns about potential risks from the anonymous and uncontrolled instruments. 

Regulatory Debate

“We are totally opposed to private money, no matter if it is in physical or virtual form,” Nabiullina told reporters last week, warning that the increasingly popular mining of cryptocurrencies also bears risks. Last month, she said, “We don’t legalize pyramid schemes.”

But Siluanov said in September the government plans to regulate cryptocurrencies as securities, with a bill expected by the end of the year.

In his comments Tuesday, Putin said he was aware of the central bank’s concerns, including about the risk that retail investors could fall victim to fraud using the new instruments.

For the moment, the central bank prefers to delay a decision on the issue unless Putin pushes for action sooner, according to one person familiar with the situation who asked for anonymity to discuss private deliberations. Since China’s ban on initial coin offerings and tightened regulation of domestic trading roiled the market, concerns have grown in Russia about the dangers of hasty moves on rules, this person said.

The central bank will work with prosecutors to block websites that allow retail investors access to bitcoin exchanges, Sergey Shvetsov, first deputy governor of the central bank, told a conference Tuesday. “We think this is a pyramid scheme, the risks are too high,” he said.

Despite the regulatory questions, some Russian cryptocurrency projects have been moving forward. A company co-owned by the president’s internet ombudsman, Dmitry Marinichev, had raised $43 million in an ICO to fund a domestic digital currency-mining operation. Sberbank PJSC, Russia’s largest bank, is studying the possibility of opening cryptocurrency accounts at its Swiss unit, Tass reported last month, citing the head of Sberbank CIB Igor Bulantsev.

In June, Putin met with Vitalik Buterin, the founder of the world’s second-largest cryptocurrency after bitcoin, and gave his blessing for Russia to develop blockchain, the technology underlying the instruments.

— With assistance by Stepan Kravchenko, Olga Voitova, and Irina Reznik

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