Russia Says Bitcoin Should Be Avoided [Updated]

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Russia doesn’t do things by halves — Bitcoin shouldn’t be used by individuals and legal entities according to a recent statement. If you have a Bitcoin wallet on your computer, the Government will be suspicious. The Central Bank of Russia reiterated that the official currency is the Ruble, and that it considers Bitcoin a money surrogate. That’s why the cryptocurrency should be avoided

Here’s an abstract of the statement translated using Google Translation:

According to Article 27 of the Federal Law “On the Central Bank of the Russian Federation (Bank of Russia)” release on the territory of the Russian Federation of surrogates is prohibited.

[…]

The Bank of Russia has warned that Russian legal entities providing services for the exchange of “virtual currency” in rubles and foreign currency, as well as for goods (works, services) will be considered as a potential involvement in the implementation of suspicious transactions in accordance with the legislation on counteraction to legalization (laundering) proceeds of crime and financing of terrorism.

Here’s the article 27:

Article 27. The official currency (currency) of the Russian Federation is the ruble. One ruble is divided into 100 cents.
Introduction to the territory of the Russian Federation and other monetary units issue money substitutes prohibited.

The Central Bank issued a clarification, not a new rule. In other words, with existing laws, transactions in Bitcoin are seen as “potentially suspicious.”

The reasons behind this move is that Bitcoin is reportedly used for money laundering and other criminal activities. Moreover, the Russian institution thinks that it’s a purely speculative currency and that there is a great risk of value losses.

Yet, telling people to avoid using Bitcoin doesn’t mean that people will stop using Bitcoin overnight. As Bitcoin doesn’t rely on any physical institution but the network of miners around the world, you can’t prevent Russians from using Bitcoin.

But companies that are based in Russia and are working in the Bitcoin industry should at least consider relocating. They will probably be the first entities under scrutiny by the Russian government.

While harsh, this decision shouldn’t come as a surprise. Bitcoin was designed to be unregulated. But over time, many countries and official institutions have decided to try and regulate it.

For example, in August, a federal judge in Texas has declared that Bitcoin is a currency and should be regulated just like euros or U.S. dollars.

Similarly, New York’s financial services stated that Bitcoin companies should respect the current financial regulatory guidelines. By doing that, the authority wanted to protect Bitcoin holders and companies. Moreover, New York’s top banking regulator is currently writing a new set of rules to decrease illegal Bitcoin activities.

Finally, following a parliamentary inquiry, Germany stated that Bitcoin should be considered as “private money.” It has many implications, starting by paying sales tax (VAT). This rule is hard to implement, but it gives an idea of how the German government feels.

For all these reasons, Bitcoin won’t be able to remain an unregulated currency for long. In Russia, today’s warning is another step in that direction, and it’s a radical step.

An earlier version of this article incorrectly stated that the Central Bank of Russia issued new rules regarding cryptocurrencies. In reality, the Central Bank reiterated existing rules and how they apply to Bitcoin.

(Via Slashdot)