Russian Central Bank Report Examines Crypto’s Place in the Financial System
The Central Bank of Russia (CBR) is looking for ways to integrate crypto assets and blockchain technology into its local financial system amid a buildup of global financial sanctions.
In a CBR Telegram article on Nov. 7, the central bank share a public consultation report entitled “Digital Assets in the Russian Federation”.
It examines how the sanctioned state could possibly open its domestic market to foreign issuers of digital assets, especially those from “friendly countries”.
Other areas of focus in the report are digital asset regulation, retail investor protection, digital property rights related to smart contracts and tokenization, and reformed accounting and tax proposals.
The CBR said it strongly supports the “further development of digital technologies” provided they do not create “uncontrollable” financial or cybersecurity risks for consumers.
Despite the birth of blockchain technology, CBR said the same regulatory rules regarding the issuance and circulation of traditional financial instruments should also extend to digital assets.
The CBR said that near-term regulation should focus on protecting investors’ rights, strengthening rules for admitting a digital asset into circulation, ensuring that the issuer is accredited, and ensuring that the issuer discloses all relevant information to investors.
The central bank’s message on Telegram, originally written in Russian, stated that although the legal framework for digital assets has been created, improved regulation is needed for its continued development:
“Russia has created the necessary legal framework for the issuance and circulation of digital assets […] But so far, the market is only at the initial stage of development […] and is several times lower than the market for traditional financial instruments. Its further development requires better regulation.
As for the regulation of smart contracts, the central bank acknowledged that a legislative framework was already in place. However, he proposes that smart contracts created by Russia should be independently audited before being deployed.
CBR was also positive about the potential of tokenized off-chain assets. However, the bank noted that legislation would need to be put in place to ensure that a “legal bond” exists between the token holder and the token itself.
The report comes as the Russian Finance Ministry recently approved the use of cryptocurrencies as a means of cross-border payment by Russian residents on September 22.
However, the 33-page CBR report makes no reference to the increased sanctions that have been imposed on Russia and the crippling effect it has had on its economy – nor does it address the Russian-Ukrainian war currently taking place in Ukraine.
However, he mentions a separate report he is working on, which focuses on the new central bank digital currency (CBDC) — the digital ruble — which should be tested in early 2023.
In August 2022, the CBR said it planned to rollout of the digital ruble to all Russian-based banks in 2024.