The amount of cryptocurrency in the “shadow” economy has doubled over the past 4 years, and that was the reason for amending the current legislation. The amount increased as the result of illicit drug and gun trafficking, transfer of digital assets obtained from illegal schemes or activities. In order to regulate the use of cryptocurrencies, the Russian Federation amends anti-money laundering and bribery law using digital currencies.
Bribes in Bitcoin and other digital currencies were actively mentioned in the spring of 2019, when the media reported that allegedly employees of the Federal Security Service of Russia (FSB) extorted $1,000,000 BTC bribe from a Russian businessman.
By the end of 2019, the Supreme Court of Russia included the concept of “cryptocurrency” in articles 174 and 174.1 of the Criminal Code of Russia. These articles refer to penalty for money laundering and bribery in cryptocurrencies, along with fiat currencies and other valuable assets.
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Crypto theft, wallet hacking and money laundering
According to media sources, the FSB officers were allegedly involved in the theft of $450,000,000 worth cryptocurrency from Wex, one of the largest online exchanges in the world. Wex was a branch of BTC-e, which transmitted information on Bitcoin transfers and Bitcoin wallet addresses to the Russian military intelligence agency.
Eventually in 2017, BTC-e was shut down for laundering $4 billion in cryptocurrency, as part of the first of its kind joint operation initiated by the law enforcement agencies and several financial crime offices of the US Treasury Department.
The scandal spreaded, and soon a hacker virus (“highly likely” from Russia) was detected on the computers of employees of the Tokyo Coincheck exchange, which was hacked in January 2018. As a result, 500 million NEM tokens worth $530 million were stolen. This is the largest theft in the history of cryptocurrency exchanges.
In 2019, the Supreme Court of Russia declared cryptocurrency theft a criminal offense, followed by introduction of new amendments to the digital currency regulation. The Court further instructed the Central Bank of Russia to amend anti-money laundering laws regarding cryptocurrencies.
On February 17, 2020, new amendments to the Law on Digital Financial Assets were published. Now, no matter which Bitcoin wallet you choose, any cryptocurrency transaction is classified as a potential risk of money laundering, and accounts can be categorized as “doubtful transactions”. More than that, according to the new amendments, a crypto wallet and all of its assets can be frozen while the investigation for illicit obtaining of digital funds is in progress.
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The Central Bank and the FSB have already banned the use of cryptocurrency as a payment method. In order to deanonymize all cryptocurrency users, the regulation allows the exchange of cryptocurrency for rubles at special exchange points.
Russia is amending its legislation on digital currency together with the Eurasian Economic Union and the BRICS countries. This can buy some time to study the cryptocurrency market, as well as develop new amendments in order to regulate the cryptocurrency market. Besides, new ways to stimulate innovations in cloud platforms and mobile digital payment solutions using Bitcoin and other digital currencies can be created.