With the explosion of DeFi, Crypto and the scaling of the Bitcoin network & digital gold, the world of Blockchain and cryptocurrency is enjoying far more attention than it has received in the past. For this reason, governments and regulatory agencies are putting things in place to see how they can take advantage of the nascent technology and its many perks. Today we take a look at how it’s impacted Russia-one of the strongest economies in the world.
An observation on the Russian Crypto climate reveals a somewhat love-hate relationship that we will further explore in this piece. One of the most recent developments in Russia is that the government, through the Ministry of Digital Development, Communications and Mass Media is very much interested in what makes up the data storage departments in the country.
The Ministry recently recommended a legislative bill to the Russian government and is presently calling the general public to give their opinions as to the proposed bill. This proposed legislative bill invariably targets crypto mining farms among others.
To this end, the Ministry proposed a legislative bill which in effect will, if approved, centralizes sensitive information about data storing departments of the country.
Essentially, these departments will have to register their undertakings and procedures to the relevant government agency, i.e., the internet censor Roskomnadzor. We all know what this invariably means for crypto miners who will have to file accounts of their operations.
Just recently, Igor Runets, the CEO of Russian giant mining farm- Bitriver, emphasized that for sure miners will be affected by the incoming regulations if it’s passed into law as miners may have to submit quarterly reports to the relevant government agency.
Russia’s Stance on Crypto Prior to the Most Recent Bill
Prior to the proposal of this most recent bill, the Russian President, Vladimir Putin passed one out of two digital assets bills into law. A local news outlet, Regnum highlighted that Russia’s legislative agency dubbed the law “On Digital Financial Assets” (DFA) when it was brought before the legislative house for the final assessment.
Essentially, blockchain companies dealing with virtual securities within the Russian territory must register their companies as security issuers after fulfilling particular prerequisites given by the Bank of Russia.
Although, the Russian government has scaled its interest in Crypto by deeming it a taxable asset that cannot be accepted as legal tender in payment for goods and services; the Russian Central Bank, Bank of Russia appeared to be very unconvinced about Crypto.
This newly passed bill is anticipated to become operational in Russia come on January 1, 2021. It has specifically given a definitive meaning to digital assets and authorizes the buying and selling of crypto in Russia. It however continues to disallow the use of crypto as legal tender in payment for commodities.
For a fact, the preceding form of the bill was to the effect that it is unlawful to trade Crypto on any Russian based platforms. This love-hate relationship with Crypto has incited negative feedback from the crypto network and unreserved disapproval of Russia’s Ministry of Justice and Ministry of Economic Development.
It is to be noted that although the DFA legislation is Russia’s pioneer Crypto regulation, a regulatory framework to supervise the industry is yet to be passed to the law and legislators are looking at December. It is proposed that this new law will be labeled “On Digital Currency,” or DA and will regulate the Crypto industry as a whole.
The Essence of the Most Recent Bill Targeted at Russia-based Data Centers
Now to a quick recap of the aforementioned bill by the Ministry of Digital Development, Communications and Mass Media. A data storing department which is particularly given the designation “data center” has been described as “an object with its own infrastructure for hosting hardware providing storage, processing, and access to data with guaranteed levels of accessibility, security, and management”.
As earlier explained, crypto miners fall into the category of a data center. So they must as a rule, file required information as projected by the government. One other major highlight of the drafted bill is that any official who falls into the category of an “Operator” of a data center must file required reports describing the computing capability of the infrastructure; he must outline how the infrastructure store-keeps data, what services the facility renders and their service rates.
Another piece of information that is precious to the Russian government is exactly where these data facilities are located. They want to ascertain where they are situated and carry out their daily course of business.
The government wants all equipment and technology used in these facilities to be registered. As expected, this has provoked an outcry from the Crypto network who of course feel stifled by these unconscionable provisions.
It appears that the Russian government wants to invigilate the evolution of nascent digital technologies and its attendant economic system by having data storing facilities file particular information. Many do not even understand the security and privacy related protocols enough to realize why the government is particular about having commercial information stored centrally.
One prominent founder of a non-profit in the business of supervising digital censorship and surveillance practices in Russia, Artem Kozlyuk, highlighted that this may not be the best way to go about things as concentrating such sensitive and substantial bulk of information can possibly compromise the data.
With the new wave of hi-tech and less sophisticated hackers attacking both high personality profiles and government bodies like the recent attack on India’s Prime Minister- Modi’s Relief fund, it is clear how enemy countries’ intelligence agencies and scammers can attack such centralized databases.
Just like that, confidential info about technical arrangements, program updates, hardware producers, etc. can be unlawfully retrieved without much trouble. This further raises doubts whether the suggested move to centralize can be justified.
As the Crypto industry in Russia continues to grow amidst progressive and shifting regulations, it opens up a good prospect for the Russian government to be a giant in advancing the adoption of blockchain and cryptocurrency.
This move, if intelligently utilized can aid the safeguarding of databases and a good warranty for contracts. But I personally feel the centralized record-keeping might not augur well with regards to cryptocurrencies. However, it is hoped that the government will evaluate its regulatory provisions so as to create an enabling environment for crypto outlets in the country.