The Central Bank of Russia (CBR) has formally proposed a legal framework for tokenization, but also plans to label cryptocurrency transactions as suspicious activity, it said in a press release Monday.
The CBR announced it had successfully piloted a platform that allows users to tokenize assets, including equities and currencies, and issue them to investors.
Ivan Zimin, director of the CBR’s financial technology department, said in the release the bank had now proposed using the platform as a framework in the country’s upcoming cryptocurrency law, which will act as guidance for legitimate businesses wanting to tokenize assets.
“Based on the results of the piloting, the Bank of Russia proposed to include in the draft federal law ‘On Digital Financial Assets’ the provisions necessary for the introduction and development of such decisions in the emerging digital assets market, which were supported by government bodies and businesses,” Zimin said.
This coincides with local media reports that the CBR is planning on updating bank guidance on what constitutes criminal activity, for the first time in eight years. According to business news site RBC, both the sale and purchase of cryptocurrencies could be considered suspicious under the new guidance.
Still undergoing in-house assessment, the guidance would ask commercial banks to flag activity and authorizes them to block transactions, and even close the accounts, of any clients found to be trading cryptocurrencies.
CBR’s move has been met with some pushback from industry figures. Don Guo, CEO of technology and liquidity provider Broctagon, has criticized the fragmented approach. Speaking to CoinDesk, he said the two decisions on Monday will only create more uncertainty in the digital asset space.
“Russia seems to have taken one step forward, two steps back when it comes to crypto,” Guo said, adding it would leave “Russian traders scratching their heads” as other major economies, such as the U.S and China, continue to offer conflicting advice on how to regulate cryptocurrencies.
“Where China has been advocating for bitcoin (BTC) and creating its own digital currency, other countries like the U.S. seem to be fighting a losing battle to squash it,” Guo said. “Whether regulators like it or not, the adoption of digital currencies will continue, and dismissing cryptocurrencies comes with an opportunity cost.”
Since 2017, the Russian government has been drawing up a bill that would regulate cryptocurrencies and related activities such as initial coin offerings (ICOs) and trades with fiat currencies like the ruble. Although officials have previously indicated the bill was nearing completion, Binance CEO Changpeng Zhao hinted in a speech last October that Russian officials were being indecisive.
The Russian parliament passed a digital rights bill in early October that outlined basic “digital rights” in Russian law and also provided legal definitions for smart contracts and cryptocurrencies.
Monday’s news suggests Russia is now trying to create a regulatory distinction between asset tokenization, which can more seamlessly be integrated into existing financial law, and cryptocurrencies, which cannot be as easily supervised and managed by the authorities.
In October, the CBR backed a potential ban on cryptocurrency payments, claiming they carried significant risks and could not be equated with legal tender.
Reportedly one of the largest projects to ever come out of CBR’s regulatory sandbox since it launched in April 2018, the tokenization platform was developed by Nornickel, a Russian mining and smelting company. Also allowing organizations to mint “hybrid tokens” backed by different assets simultaneously, the platform will go into operation once Russia’s cryptocurrency bill passes into law.