Russia abandons state-run crypto exchange in favor of private sector regulation

Russian lawmakers have chosen to scrap plans for a state-owned cryptocurrency exchange, opting instead to establish regulations for existing private enterprises.

Colin Wu of Wu Blockchain first reported the story through Twitter on Monday, linking a translation of a Russian news article that explained that the country’s new focus would be to allow private companies to build crypto exchanges.

This latest development comes against the backdrop of ongoing Western-led financial sanctions imposed on Russia following its invasion of Ukraine.

According to a translated report, Ivan Chebeskov, director of the financial policy department of the Ministry of Finance of the Russian Federation, said, “The [ministry] did not support the establishment of one national crypto-exchange.”

Instead, the ministry now aims to “legally regulate the possibility of creating such sites by business,” and it plans to focus on setting rules and guidelines for private companies to develop and operate crypto exchanges.

Anatoly Aksakov, head of the Russian lower house committee on financial markets, revealed that the new approach involves establishing regulations for the establishment and operation of crypto infrastructures.

While specific crypto exchanges were not mentioned, Aksakov explained that these platforms would be allowed to facilitate cross-border payments, albeit with anticipated new restrictions.

The Central Bank of the Russian Federation is expected to play a role in regulating these platforms, potentially managing international settlements within the country’s regulatory framework.

The decision to involve the private sector is seen as a positive step by the industry players in the country, given Russia’s ranking of 137 out of 180 countries on the 2022 Global Corruption Index.

Oleg Ogienko of BitRiver, a crypto mining operation in Russia, said that the change would help minimize risks and eliminate market monopolies. Commercial director for GIS Mining Ivan Gostev also said that the move would “allow for more competitive and innovative companies to develop.”

Back and forth on regulations

Russia has displayed a fluctuating stance towards cryptocurrencies over the years. In early 2022, the Bank of Russia proposed an outright ban on crypto payments, following other countries that have imposed similar restrictions, like Egypt, Iraq and China. The regulation at the time forbade Russian citizens from using digital financial assets as a form of payment for any transactions involving the exchange of goods, works or services.

However, the country’s finance ministry would less than a month later propose allowing blockchain-based payments but with regulations. In a released statement, the ministry said the proposal would allow Russians to invest in crypto assets such as Bitcoin but not to make purchases with them.

“The use of digital currencies as a means of payment in the Russian Federation will continue to be prohibited. In the framework of the proposed regulation digital currencies are considered only as a tool for investment,” the statement said.

Later that year, Russian President Vladimir Putin signed a law banning payments in digital assets despite previously appearing to welcome the technology — having said that Russia had “certain competitive advantages” in Bitcoin mining, including a “surplus of electricity and well-trained personnel available in the country” to mine the cryptocurrency.

Russia then would change its stance once again when, later that year, a report revealed that the country was exploring stablecoins as an alternative form of payment for “friendly countries,” courtesy of the country’s deputy finance minister Alexey Moiseyev.

“We are currently working with a number of countries to create bilateral platforms in order not to use dollars and euros,” said Moiseyev. “Stablecoins can be pegged to some generally recognized instrument, for example, gold, the value of which is clear and observable for all participants.”