Russia

## Financial Regulatory Analysis Report: Russia

**Report Date:** April 12, 2025
**Prepared For:** Internal Review
**Subject:** Current Status of Retail Cryptocurrency Trading in Russia

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**Section: Retail_Trading_Status**

**Description:** Assessment of the legal permissibility for individual citizens and residents in Russia to buy, sell, and hold cryptocurrencies, including the surrounding regulatory environment (KYC/AML, official warnings, etc.).

**1. Current Status:** `Allowed-Regulated`

**2. Detailed Narrative Explanation:**

The status of retail cryptocurrency trading in Russia is best described as **Allowed-Regulated**, albeit with significant restrictions and ongoing regulatory evolution marked by a degree of tension between different state bodies.

**Legal Framework and Permissibility:**
*   **Ownership and Trading:** Russian citizens and residents are legally permitted to own, buy, sell (trade), and mine cryptocurrencies. This was established primarily through Federal Law No. 259-FZ "On Digital Financial Assets, Digital Currency and on Amending Certain Laws of the Russian Federation" (the "DFA Law"), which came into effect on January 1, 2021. This law provided the first major legal definitions for "digital currency" (encompassing typical cryptocurrencies like Bitcoin) and "digital financial assets" (DFAs - essentially tokenized assets issued under specific regulations).
*   **Ban on Domestic Payments:** A crucial restriction imposed by the DFA Law is the explicit prohibition on using digital currencies as a means of payment for goods and services *within* Russia. The Russian Ruble remains the sole legal tender for domestic transactions. This measure aims to maintain state control over the domestic financial system and monetary policy.
*   **International Payments Exception:** Driven largely by Western sanctions following the invasion of Ukraine, Russia has adopted a more permissive stance towards using cryptocurrencies for *international* trade settlements. Legislation enacted in 2024 established an Experimental Legal Regime (ELR) allowing Russian companies to use digital currencies for cross-border payments, aiming to bypass traditional financial channels.
*   **Mining:** Cryptocurrency mining is legal in Russia and has seen significant growth, making Russia one of the world's largest mining hubs due to relatively low energy costs. Regulations introduced in late 2024 require miners (especially larger operations) to register with authorities (Ministry of Digital Development) and adhere to specific rules, including potential energy consumption limits in certain regions.

**Regulatory Environment and Requirements:**
*   **Taxation:** Cryptocurrencies are legally recognized as "property" for taxation purposes under laws signed in late 2024, effective from 2025. Income from cryptocurrency operations (trading, mining) is subject to personal income tax (13%, rising to 15% for annual incomes over 2.4 million rubles). Corporate profits from mining are also taxed. There are requirements to report transactions exceeding certain thresholds (e.g., 600,000 rubles annually, though specific thresholds for mandatory declaration have been debated and updated). Failure to report significant crypto holdings or income can lead to substantial fines and even criminal liability. VAT does not apply to crypto transactions.
*   **KYC/AML:** Russia has established Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations, primarily under Federal Law No. 115-FZ. These obligations extend to entities handling cryptocurrency transactions. Crypto exchanges and other service providers operating within regulated frameworks (like DFA operators or those under ELRs) are required to implement Know Your Customer (KYC) procedures, verify client identities, monitor transactions, and report suspicious activities to the Federal Financial Monitoring Service (Rosfinmonitoring). International pressure and FATF standards also influence these requirements.
*   **Central Bank Skepticism and Proposed Restrictions:** The Central Bank of Russia (CBR) has historically maintained a highly skeptical stance towards cryptocurrencies, citing risks to financial stability and consumer protection. In March 2025, the CBR proposed a significant restriction on *domestic* retail trading. Under this proposal, only "particularly qualified investors" (defined by high asset thresholds - e.g., over 100 million rubles in assets or 50 million rubles annual income) would be permitted to buy and sell cryptocurrencies within a specific three-year experimental legal regime. The proposal explicitly aims to ban crypto transactions between residents outside this regime. While this is currently a *proposal* under discussion with the government, its potential enactment would severely limit access for the average Russian citizen, shifting the status closer to 'Restricted'.
*   **Digital Financial Assets (DFAs):** It's important to distinguish decentralized cryptocurrencies from DFAs. DFAs are issued and circulated on information systems registered and supervised by the Bank of Russia. These represent digital rights (like claims on assets or securities) and operate within a more tightly controlled environment.

**Conclusion:** While owning and trading crypto is currently legal for the general retail public, the environment is strictly regulated. The ban on domestic payments is a major limitation. Furthermore, the recent CBR proposal to restrict trading access to only wealthy investors highlights the ongoing regulatory uncertainty and the potential for significantly tighter controls on retail participation in the near future. The allowance for international crypto payments under an ELR shows a pragmatic adaptation to external economic pressures, contrasting sharply with the restrictive domestic proposals.

**3. Supporting Excerpts from Sources:**

*   **On Legality vs. Payment Ban:** "Is crypto legal in Russia? It is yes for holding, trading and mining. But it is prohibited from use in domestic payments." (Source: Coinfomania, 2025-04-05)
*   **On DFA Law and Payment Ban:** "The ban on using cryptocurrencies like Bitcoin for payments in Russia was part of the country's first crypto law, “On Digital Financial Assets,” which came into force in January 2021... The Bank of Russia still does not consider cryptocurrency as a means of payment." (Source: Cointelegraph, 2025-03-12)
*   **On Taxation:** "Russian President Vladimir Putin has signed the law regulating the taxation of income and expenses from cryptocurrency mining, as well as from its purchase and sale... Cryptocurrency is recognized as property for tax purposes... Personal income tax will be set at 13% starting in 2025, and the rate will rise to 15% if an individual's annual income exceeds 2.4 million rubles." (Source: Interfax, 2024-11-29)
*   **On International Payments:** "Since Russia's full-scale invasion of Ukraine, authorities have taken significant steps to promote and regulate cryptocurrencies... A new set of laws that took effect in November 2024 legalizes cryptocurrency mining and permits crypto payments for international transactions, though domestic payments are not legal." (Source: The Moscow Times, 2025-03-19)
*   **On Proposed Retail Trading Restrictions:** "The Central Bank of Russia has proposed restricting cryptocurrency transactions to 'particularly qualified investors' who possess over RUB 100 million (US$1.1 million) in securities or have earned more than RUB 50 million (US$560,000) per year... For other citizens, cryptocurrency transactions may be prohibited, with penalties introduced for violations." (Source: Ukrainska Pravda / The Moscow Times, 2025-03-13 / 2025-03-17)
*   **On KYC/AML:** "The legal structure regarding KYC and AML in Russia has evolved... These requirements not only affect banks but also financial service companies, cryptocurrency firms... Federal Law No. 115-FZ... establishes the obligation for due diligence during client onboarding." (Source: Didit, 2025-01-10)
*   **On DFA Definition:** "The law defines DFAs as digital rights certifying specific monetary claims, rights to securities, shares in a private joint stock company, and the right to claim transfer of securities." (Source: BIGTXN, 2024-06-01)

**4. Source Links:**

*   **Coinfomania (Crypto Regulations in Russia):** `https://vertexaisearch.cloud.google.com/grounding-api-redirect/AWQVqALEqZoP1xGojXxEU8wTYDYaRoUoxFOlaIQyWvZDNdkkAwr6DtUcMgQr4y13FsziZaUV1EA9Y3SUBtZe3dvGa7O5pXH6EGGJTwXai8kcrNG6szxbyAE77L28KbDJMATrYIEWfRMdYwbc6Lt7sApIYEFMRUsh` (Provides overview as of April 2025)
*   **Cointelegraph (Bank of Russia Proposal):** `https://vertexaisearch.cloud.google.com/grounding-api-redirect/AWQVqAJu3gConm5grmWDXH5rx999SQAEePwW4xsXYIgwaUh2SoawJNNBA1GzdXykFbg2n2vSJLAhWAmHHeWnvaCCXa7XfSfZfozI05BHg23KLZHpIRMuQaZZNIYPzAL1L7MRfJvlzxu98srPWdFVF-Jznq8nzE12nvs8eH7Q3EBD5klpk84mWUZRS_Auo1cpdvVoswU=` (Details March 2025 proposal)
*   **The Moscow Times (Crypto & Sanctions):** `https://vertexaisearch.cloud.google.com/grounding-api-redirect/AWQVqALzbXMVMLC1YBuLoedVeH1b0XUivAaqmLkiN2m0nrSlbJXfOJIQaX4qWyPsiXg7cZRfdmSaU4XawOQXmydrDQhNxOGpWovoEmNlTW6uqcJus2-UYDJrAaNKYIE5nwnnJCXLafV1DtEDBMSfDSg93zyYSrMVCcfcjM0UdOWQ27ncoKlLfSY2J4gZqrlygDwS58rwbUD5` (Context on international payments)
*   **The Moscow Times (Qualified Investor Proposal):** `https://vertexaisearch.cloud.google.com/grounding-api-redirect/AWQVqAIeO-MEge0Yik1rhRllJuBkpGAVAonsxoupaHkUpbAuakXDnWgj3R_hlvKgqwT_8AkerPOToXUGO6xxqt6Wge9uYZRl_5HhxjXZZkoQu9DecBy3rKEQetWj56-D1Ilxupv4T0q_4cYBCuaHWt1XfiPqzrTkHOCAl-KjHuWKAfwhhEi-WoZqLqmj9r_LZQ9YPyuNaTQh5V8Azewj2eAHhebaVQrAf8riitu3lqpV3HgcsRRQ0I2nik2SuFw=` (Further details on CBR proposal)
*   **Interfax (Tax Law Signed):** `https://vertexaisearch.cloud.google.com/grounding-api-redirect/AWQVqAL5ozWEu5zi2f_fca339PgNCGfwVMQdQ9hM1oftYLZA-NsC8u6qSZt38wUCw3XzltOy455LiBmu3tbfjOcm_7EG_BJIwDB4q1Bx6kDrQXrogCNOseDmZ2dAhhFPmBsXWcr4UkGpw8oa` (Details on Nov 2024 tax law)
*   **Ukrainska Pravda (Qualified Investor Proposal):** `https://vertexaisearch.cloud.google.com/grounding-api-redirect/AWQVqAIkuSRnUFUjalN3B5dBoLC22nreC8yK_wz7UZ3Rj920hhUtTPB7adwTw0b4KJ43tF42O8lWkV2zrsTjKWP1LEFwqAtjmdz3DX735mN5MMKyrklhi7hcHWmLS0Cqk4_g1Rd8H7fS-rbWcPtW_ro=` (Reporting on CBR proposal)
*   **Didit (KYC/AML in Russia):** `https://vertexaisearch.cloud.google.com/grounding-api-redirect/AWQVqAJnKgiNtNOAizBNbOZ4sLDFaqdZ7chKAXyy00UeNq9H52Cwpr0xjChT_4lnpTi0gKUCvvbLyuX4jEeho4G2pD9KKVBGiRvlzu_WVo8Rs_-FOyWn-GB-nAwn-XqXD1V9Cd95qyWkuc2InlVNH8lxTHafWDZAhO1PoH0HDl_H-5ROLNm8` (Overview of KYC/AML framework)
*   **BIGTXN (DFA Law Overview):** `https://vertexaisearch.cloud.google.com/grounding-api-redirect/AWQVqAJ5Dr_nHXJJyWKiu1Ma9a0USopRaTc9fMIfQZkgAKno1A3D_cUHM3CezytOp1lndtJiwZjl1tV5p4ErUwa2LfbvBSwlCBuTwpyZ0Af0ymTrCJ0RMdYROr3HYIsqs_zGz_K1eN34izwguQzQFCgZGYWA_B-1z4f47ybs4Pzp_ug=` (Explains DFA concepts)
*   **Bank of Russia (DFA Information):** `https://vertexaisearch.cloud.google.com/grounding-api-redirect/AWQVqAJmlc5k63bPcVHj2pway4dOR11kZIXou-ugJpN3MFnvA5zx8pe3s40EHxGpQSWz1W9pf6SqZ0nbw66Ftb82DNUv5-5NTtdpIgnJ_hQRgiTr9--O5eoEz6vwNcClafZFBNLhegJim4Ss1aO6PvpudQ==` (Official definition and role of DFAs)
*   **Freeman Law (DFA Law Summary):** `https://vertexaisearch.cloud.google.com/grounding-api-redirect/AWQVqALj_UbklrdtdLwrZOhhLOnI0rcN8hTSZDhWXrl-sRaRohNJMpN5CydLqoYoOb5CKcMuv23D3Pe0Qi66nxzke8O7d9mYiEKEnAWAkJHQam7kNWb2sZaW6OI9SKhyKV46MUaDGLY=` (Summary of the 2020/2021 DFA Law)

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**End of Report Section**