The Central Bank of Russia, the Federal Financial Monitoring Service (Rosfinmonitoring) and five major banks are testing a new "Know Your Crypto Client" service. It will allow credit institutions to identify links between customers ' operations with cryptocurrency and conventional money.
Testing the service
The Bank of Russia and Rosfinmonitoring are developing a platform for banks to identify the connection of customer transactions with conventional (fiat) money and cryptocurrency. Large credit organizations are already testing the service in pilot mode as of April 27, 2024. This was announced by Ilya Bushmelev, Director of Project Portfolio Management at Innotech. The company is a technology partner in the creation of the Transparent Blockchain platform from Rosfinmonitoring.
According to Bushmelev, the task before us is to identify the connection between fiat and crypto operations. Credit institutions currently have all the opportunities to work with fiat, but cryptocurrency transactions for April 2024 are still considered separately. Bushmelev added that there are a large number of tools that allow you to look at crypto operations, "Transparent Blockchain" is one of them, which is created on the basis of Rosfinmonitoring. The service will help in the tasks of the pilot of the Central Bank (CB) of Russia and Rosfinmonitoring as part of the instructions of the President of the country. According to Bushmelev, this pilot can help improve the regulation of cryptocurrencies more effectively.
As part of this project, five leading Russian banks plan to continue their work on testing the Know Your Crypto Client service until the end of May 2024, after which the results will be evaluated, and the deadline may be extended indefinitely. As part of the pilot project, a fundamental understanding of the necessary actions and tools for credit institutions in the field of cryptocompliance, the "Know your crypto client" and "Know your crypto transaction" procedures was developed.
At the same session, Alexander Kuryanov, Head of the Rosfinmonitoring Department, noted that as of April 2024, market participants are testing scenarios for linking the client's fiat operations with their operations in the non-fiat circuit. On this basis, it is possible to form some methodological approaches, recommendations, which in principle can be called the word "regulatory".
Working IT platforms
Since the beginning of 2021, the Transparent Blockchain platform has been operating, developed on the initiative of Rosfinmonitoring, which helps financial intelligence analyze crypto transactions to ensure financial stability and control illegal activities on the territory of Russia.
Since July 1, 2022, the Central Bank's Know Your Customer platform has been operating in Russia, which analyzes financial transactions of bank clients and determines their risk level within three groups. This system is related to the prevention of questionable operations using the traffic light principle.
Legislation
In July 2020, Russia adopted the law " On Digital Financial Assets "(CFA), which defines the circle of CFA providers - operators of systems in which such assets are issued and exchanged. However, as of April 27, 2024, Russian legislation does not specify who can act as a provider of digital currencies, including cryptocurrencies. According to RBC, there is only a ban for residents to use digital currencies as a means of payment.
In December 2022, the Central Bank proposed a bill banning the issuance and circulation of cryptocurrencies, but the Russian Ministry of Finance did not agree with this initiative. The agency presented its concept of regulation, which proposed to carry out cryptocurrency operations through banks and identify participants in transactions. However, at the end of April 2024, the norm was not adopted, so the question remained open.
Insufficient regulation in the field of cryptocurrencies has already affected how Russia is assessed by the International Anti-Money Laundering Group (FATF) for 2024. In February 2024, Russia faced a downgrade of one of the FATF ratings, which reflects the state's results in monitoring operations with virtual assets and cryptocurrencies. This may lead to restrictions on international cooperation and increased pressure from the international community.
Contrasting approaches
Japan and Switzerland have amended or introduced new legislation regarding crypto assets and their service providers, while others, including the European Union( EU), United Arab Emirates (UAE), the United Kingdom and the United States are in the pipeline. But the national authorities generally take very different approaches to the policy of regulating cryptoassets.
On the one hand, the authorities banned residents from issuing or storing crypto assets, as well as the ability to make transactions with them or use them for certain purposes, such as payments. On the other hand, some countries were much more hospitable and even tried to persuade companies to develop markets for these assets. The resulting fragmented global response does not provide a level playing field and does not protect against a race to the bottom, as cryptocurrency participants migrate to the friendliest jurisdictions with the least regulatory rigor, while remaining accessible to anyone with internet access.
The international regulatory community is also not idle. In the early years, the main concern was to preserve financial integrity by minimizing the use of crypto assets to facilitate money laundering and other illegal transactions. The Financial Action Task Force quickly set about creating a global framework for all virtual asset service providers. The International Organization of Securities Commissions (IOSCO) has also issued regulatory guidance on cryptocurrency exchanges.
The concern is that the longer this takes, the more national authorities will be tied to different regulatory frameworks. This is why the International Monetary Fund (IMF) is calling for a global response that will be coordinated so that the world's largest financial institution can fill regulatory gaps resulting from cross-sectoral and cross-border bond issues and ensure a level playing field. The regulator wants to be consistent in this matter, that is, its actions should be consistent with the main approaches to regulation across the entire spectrum of activities and risks and comprehensive, that is, covering all participants and all aspects of the crypto ecosystem.
Crypt Ban
Cryptocurrency is banned for various reasons, including financial, economic, regulatory and social aspects. Cryptocurrency is banned in Iraq, Egypt, Nepal, Qatar, Tunisia, Afghanistan, China, North Macedonia, Ghana, Algeria, Bangladesh, Bolivia and Morocco.
Banning cryptocurrencies or restricting their use may also be due to the government's desire to control the flow of capital. Countries want to ensure compliance with international standards for combating money laundering and terrorism, as well as protect their national currencies and traditional financial institutions.
In some countries, cryptocurrencies are not officially banned, but there are certain restrictions or implicit barriers, for example, mining is closed, which make their use less attractive and convenient. This may include restrictions on transactions or payments, etc., which can be observed in Israel, Turkey, Tanzania, Thailand, Indonesia, Malaysia, and Kazakhstan.
Testing the service
The Bank of Russia and Rosfinmonitoring are developing a platform for banks to identify the connection of customer transactions with conventional (fiat) money and cryptocurrency. Large credit organizations are already testing the service in pilot mode as of April 27, 2024. This was announced by Ilya Bushmelev, Director of Project Portfolio Management at Innotech. The company is a technology partner in the creation of the Transparent Blockchain platform from Rosfinmonitoring.
According to Bushmelev, the task before us is to identify the connection between fiat and crypto operations. Credit institutions currently have all the opportunities to work with fiat, but cryptocurrency transactions for April 2024 are still considered separately. Bushmelev added that there are a large number of tools that allow you to look at crypto operations, "Transparent Blockchain" is one of them, which is created on the basis of Rosfinmonitoring. The service will help in the tasks of the pilot of the Central Bank (CB) of Russia and Rosfinmonitoring as part of the instructions of the President of the country. According to Bushmelev, this pilot can help improve the regulation of cryptocurrencies more effectively.
As part of this project, five leading Russian banks plan to continue their work on testing the Know Your Crypto Client service until the end of May 2024, after which the results will be evaluated, and the deadline may be extended indefinitely. As part of the pilot project, a fundamental understanding of the necessary actions and tools for credit institutions in the field of cryptocompliance, the "Know your crypto client" and "Know your crypto transaction" procedures was developed.
At the same session, Alexander Kuryanov, Head of the Rosfinmonitoring Department, noted that as of April 2024, market participants are testing scenarios for linking the client's fiat operations with their operations in the non-fiat circuit. On this basis, it is possible to form some methodological approaches, recommendations, which in principle can be called the word "regulatory".
Working IT platforms
Since the beginning of 2021, the Transparent Blockchain platform has been operating, developed on the initiative of Rosfinmonitoring, which helps financial intelligence analyze crypto transactions to ensure financial stability and control illegal activities on the territory of Russia.
Since July 1, 2022, the Central Bank's Know Your Customer platform has been operating in Russia, which analyzes financial transactions of bank clients and determines their risk level within three groups. This system is related to the prevention of questionable operations using the traffic light principle.
Legislation
In July 2020, Russia adopted the law " On Digital Financial Assets "(CFA), which defines the circle of CFA providers - operators of systems in which such assets are issued and exchanged. However, as of April 27, 2024, Russian legislation does not specify who can act as a provider of digital currencies, including cryptocurrencies. According to RBC, there is only a ban for residents to use digital currencies as a means of payment.
In December 2022, the Central Bank proposed a bill banning the issuance and circulation of cryptocurrencies, but the Russian Ministry of Finance did not agree with this initiative. The agency presented its concept of regulation, which proposed to carry out cryptocurrency operations through banks and identify participants in transactions. However, at the end of April 2024, the norm was not adopted, so the question remained open.
Insufficient regulation in the field of cryptocurrencies has already affected how Russia is assessed by the International Anti-Money Laundering Group (FATF) for 2024. In February 2024, Russia faced a downgrade of one of the FATF ratings, which reflects the state's results in monitoring operations with virtual assets and cryptocurrencies. This may lead to restrictions on international cooperation and increased pressure from the international community.
Contrasting approaches
Japan and Switzerland have amended or introduced new legislation regarding crypto assets and their service providers, while others, including the European Union( EU), United Arab Emirates (UAE), the United Kingdom and the United States are in the pipeline. But the national authorities generally take very different approaches to the policy of regulating cryptoassets.
On the one hand, the authorities banned residents from issuing or storing crypto assets, as well as the ability to make transactions with them or use them for certain purposes, such as payments. On the other hand, some countries were much more hospitable and even tried to persuade companies to develop markets for these assets. The resulting fragmented global response does not provide a level playing field and does not protect against a race to the bottom, as cryptocurrency participants migrate to the friendliest jurisdictions with the least regulatory rigor, while remaining accessible to anyone with internet access.
The international regulatory community is also not idle. In the early years, the main concern was to preserve financial integrity by minimizing the use of crypto assets to facilitate money laundering and other illegal transactions. The Financial Action Task Force quickly set about creating a global framework for all virtual asset service providers. The International Organization of Securities Commissions (IOSCO) has also issued regulatory guidance on cryptocurrency exchanges.
The concern is that the longer this takes, the more national authorities will be tied to different regulatory frameworks. This is why the International Monetary Fund (IMF) is calling for a global response that will be coordinated so that the world's largest financial institution can fill regulatory gaps resulting from cross-sectoral and cross-border bond issues and ensure a level playing field. The regulator wants to be consistent in this matter, that is, its actions should be consistent with the main approaches to regulation across the entire spectrum of activities and risks and comprehensive, that is, covering all participants and all aspects of the crypto ecosystem.
Crypt Ban
Cryptocurrency is banned for various reasons, including financial, economic, regulatory and social aspects. Cryptocurrency is banned in Iraq, Egypt, Nepal, Qatar, Tunisia, Afghanistan, China, North Macedonia, Ghana, Algeria, Bangladesh, Bolivia and Morocco.
Banning cryptocurrencies or restricting their use may also be due to the government's desire to control the flow of capital. Countries want to ensure compliance with international standards for combating money laundering and terrorism, as well as protect their national currencies and traditional financial institutions.
In some countries, cryptocurrencies are not officially banned, but there are certain restrictions or implicit barriers, for example, mining is closed, which make their use less attractive and convenient. This may include restrictions on transactions or payments, etc., which can be observed in Israel, Turkey, Tanzania, Thailand, Indonesia, Malaysia, and Kazakhstan.
