Online guide to the Russian tech market
Home News Ben Hopkins

Bitcoins fund terrorism claims Russian Central Bank

0 30 January 2014

The Central Bank of Russia wants to oblige other banks to notify it of all transactions connected to virtual currencies, namely bitcoins. The regulator warns that anyone using virtual currencies could be unwittingly involved in “illegal activity connected with money laundering and financing terrorism”. 

The Central Bank also points out that article 27 of the Law “On the Bank of Russia” forbids the use of virtual currencies, while a banking sector expert told Gazeta.ru that banks will be expected to comply with the Central Bank’s demand that they inform both the Central Bank and the Federal Financial Monitoring Service about any “suspicious transactions”. If they fail to do so, banks could face sanctions up to and including the withdrawal of their license to provide credit. 

The Central Bank statement principally targets bitcoins, which have been around since 2008 but came to global prominence in 2013 when they became a popular asset for investors and major funds, causing the value of a single bitcoin to peak at $1240. 

However, concerns about the potential use of the virtual currency for illegal activity came to the fore when the Silk Road drugs market was exposed. The site offered more than 500 narcotics, which could all be bought anonymously using bitcoins. 

In the wake of this scandal many Central Banks around the world have begun to consider how best to regulate the use of virtual currencies, and in December 2013 the Chinese Central Bank prohibited all bitcoin transactions, causing the bitcoin-dollar rate to drop sharply. 

The Russian Central Bank announcement had less impact on the bitcoin-dollar rate, which suffered a minor fail from $830 to $760 on Monday. This may be connected to the low proliferation of the virtual currency in Russia, where just a few dozen companies currently accept bitcoins, including Kill Fish bars, some branches of Subway and watch maker Raketa

We asked Olga Vorkueva, Senior Partner at Moscow law firm Vorkueva & Partners, to clarify the legal status of virtual currencies in Russia. 

Currently there are no existing laws covering virtual currencies in the Russian Federation, as these currencies do not fall into the category of “Electronic Money” referred to in Law 161-F3 “On the National Payment System”. 

Legally, virtual currencies differ from real currency in that 

  • there is no legal responsibility on the part of the issuer
  • exchange rate is determined exclusively by supply and demand
  • transactions are made without intermediaries - there is no administration or single issuer.
  • Anonymity of payees and recipients - there are no ‘borders’. 

Virtual currencies present legislators with a difficult choice. On the one hand Bitcoins are a comfortable method of payment which have rapidly caught on among internet users. On the other, they also make life much easier for criminals, terrorists and money launderers, as they are very difficult for governments to control. It’s a case of choosing the lesser of two evils - to deny law-abiding citizens the right to use a comfortable payment method, or to give terrorists and criminals an easy way to move money around.  

Source: Gazeta.ru

Top image via Shutterstock

More on the topic

comments powered by Disqus

Author

via social network

Facebook
Google
Twitter
Linked in
Vkontakte