Russia set to tighten control over cryptocurrency market while legalizing cross-border payments

Russian authorities are preparing sweeping new regulations for the domestic cryptocurrency market, with plans to legalize cross-border transactions while significantly strengthening sanctions for other cryptocurrency operations, officials said.

“This area must receive appropriate legislative regulation so that we can restore order in the sector,” Finance Minister Anton Siluanov said on Tuesday after a strategy session supervised by Prime Minister Mikhail Mishustin.

Cryptocurrency is already used to pay for imports and move currencies abroad, Siluanov noted, adding that the Finance Ministry has reached an agreement with the Central Bank to “bring order” to the market through stricter regulatory oversight.

Attorney General Alexander Gutsan said a legal framework is now in place to prosecute those involved in the illegal circulation of cryptocurrency and allow the state to seize these assets.

The framework also includes tools to monitor transactions linked to corruption, terrorism, extremism and drug trafficking, he added.

Russian authorities, long opposed to any crypto-based payments, have softened their stance since Western sanctions disrupted access to international payment systems.

Last year, the country legalized crypto mining and cross-border settlements under an “experimental legal regime” (ELR).

Siluanov then suggested legalizing crypto exchanges, but the proposal faced opposition from the Central Bank.

The Bank, which considers cryptocurrencies too risky, wants to limit its use strictly to cross-border payments under the ELR and transactions by ultra-rich investors through approved companies.

All other uses, including domestic payments and retail investments, should be prohibited, says the regulator.

Any crypto activity outside the supervision of the Central Bank should result in criminal sanctions, said First Deputy Governor Vladimir Chistyukhin.

“We want any operation carried out without legal authorization to be considered illegal and prosecuted in accordance with the law,” he added. Crypto should initially be available only to “a very, very limited class of investors” to reduce potential financial and social losses, he said.

The Central Bank still refuses to recognize cryptocurrency as a legitimate means of payment. He proposed banning all crypto transactions between Russian residents outside the ELR framework, with penalties for violations.

The regulator did not specify what would happen to the large quantities of cryptocurrencies already held by the Russians.

Earlier this year, it estimated domestic crypto transactions at more than 1 trillion rubles ($12.4 billion) per month, with holdings in wallets linked to Russian users totaling around 827 billion rubles ($10.2 billion) in March.

Siluanov said the government cannot simply ignore this scale of activity.

The Finance Ministry is taking a softer stance than the Central Bank, advocating a gradual approach that would move the market out of the gray zone without stifling innovation.

Finance Ministry official Alexei Yakovlev suggested lowering the legal participation threshold to allow for a larger testing group.

“We should not create conditions where access to legal infrastructure is limited to a small elite segment,” he said.

Chistyukhin asserted that the Ministry of Finance and Rosfinmonitoring generally support the Central Bank’s approach, although the details are still under discussion.

Officials hope to finalize the new regulatory framework by the end of the year.

Meanwhile, security agencies have already started attacking cryptocurrency exchange offices across Russia.