The organizers of illegal crypto-exchanges were threatened with prison: what should miners be afraid of

Market participants argued with the Ministry of Finance about responsibility for violating the law, which does not yet exist

Legislative outlines began to take on disputes around the responsibility of cryptocurrency market participants for illegal activities. The State Duma is going to start discussing the relevant bill in April. This was announced by the head of the committee on the financial market of the lower house of parliament Anatoly Aksakov. The Ministry of Finance proposes to fine citizens for paying for goods with cryptocurrency by 200 thousand rubles, companies by 1 million, and up to 7 years in prison may threaten the organizers of an illegal crypto exchange. Market participants consider such punishments to be too harsh and offer to replace the prison term with confiscation of property.

The idea of ​​introducing monetary fines and criminal terms for violations related to the circulation of cryptocurrencies is not new. The discussions were started back in 2018 by Deputy Finance Minister Alexei Moiseev, who noted that criminal liability for the circulation of “money surrogates” (as cryptocurrencies were then called, in accordance with the position of the Bank of Russia) could amount to 4 years in prison. Since then, deputies, market participants, representatives of financial departments have been actively speaking out on this issue, discussing how long and for what kind of violation should be given, and now the issue is finally taking on real legislative outlines. Discussing the proposals of the Ministry of Finance, the chairman of the supervisory board of the Moscow Exchange, Sergey Shvetsov, was surprised by the proposal to criminalize violations related to cryptocurrency. He proposed to take as a basis the experience of regulation of conventional foreign currencies, when the punishment for violation of currency legislation is confiscation.

As Angelina Sevostyanova, corporate practice lawyer at Key Consulting Group, notes, the attitude of world regulators to this topic can be divided into two groups: those who are loyal to the “crypt” and those who have not yet decided. Russia belongs precisely to those who have not yet decided what to do with this area. As behavioral economics shows, in these cases, prohibitions work best to prevent money laundering or suddenly start financing terrorism: after all, cryptocurrency can be used to transfer funds anonymously, which makes it attractive to criminals and terrorists. You also need to understand that cryptocurrencies do not have the regulatory protections provided for traditional financial systems, which makes them risky for investors and consumers, who may be more vulnerable to scammers, scammers and other financial criminals, the expert noted.

Perhaps the most important factor is the inability to control the circulation of cryptocurrency, which can make it difficult to conduct monetary policy and protect the economy from financial instability, as well as create conditions for tax evasion. “As far as it can be judged from the information published in the public domain regarding the amendments being developed on liability in the field of mining activities and the use of cryptocurrencies, the position of the Ministry of Finance of the Russian Federation is mainly due to the current Russian legislation,” continues the conversation with the Director for Government Relations BitRiver Oleg Ogienko. In particular, according to the expert, we are talking about the need to comply with mandatory procedures to combat money laundering and the financing of terrorism. “But the current Russian administrative and criminal legislation, in our opinion, already has the necessary legal tools to stop illegal activities, and excessive regulatory pressure can reduce incentives for the full development of a promising new industry,” Ogienko said. With sound regulation, it can generate tax revenues of up to 50 billion rubles a year and provide new liquidity of about 240 billion rubles a year. And if the responsibility is already very tough at the first stage of regulation, this will cause the relocation of business entities to other jurisdictions, the expert warned.

“I would still comment with caution on bills that have not yet been presented to the public: it is not entirely clear who exactly is the author of the law, whose signatures will be under it,” says Sergey Mendeleev, head of InDeFi Smart Bank. “Let me remind you that Article 104 of the Constitution of the Russian Federation contains an exhaustive list of subjects of legislative initiative, and the Ministry of Finance, with all due respect to this organization, is not included in this list.” The expert believes that for starters, the law should spell out the rules of the game, see how it goes for a couple of years, make changes, and only then impose penalties for their violations. For some reason, the legislator begins by prescribing monstrous terms for organizing illegal crypto exchanges. But where can you read the rules of operation of legal Russian crypto-exchanges and exchangers? And of course, it is not clear why only administrative liability is provided for the illegal circulation of dollars and euros with fines from 20% to 40% of the transaction amount, and they want to immediately give a “criminal” and put them in jail for 7 years for organizing a crypto exchange, Mendeleev emphasized.

Nevertheless, forecasts about how the disputes of various departments about punishment for the illegal circulation of cryptocurrency will end are not optimistic. While market participants hope for the prudence of the authorities, lawyers point to difficulties and inconsistencies. “Probably, the Ministry of Finance will stick to the original plan: tightening regulation of the cryptocurrency market,” Angelina Sevostyanova believes. “The future of the Russian cryptocurrency is vague, and it is not yet known whether the Russian cryptocurrency market has a future in principle or whether it is doomed to go into complete shadow.”