Prison for bitcoin in Russia is currently being considered as a measure in a draft law: the Ministry of Finance of the Russian Federation has prepared amendments under which the issuance and exchange of cryptocurrency may be punishable by up to 4 years of imprisonment.
What the Finance Ministry Proposes
The new initiative significantly tightens the approach to virtual money. Previously, operations with bitcoins and other cryptocurrencies were proposed to be punished with a fine of up to 500,000 rubles or corrective labor for up to 2 years. Now, criminal liability is in focus.
In short, the Finance Ministry proposed to divide the measures as follows:
- Issuance and exchange of cryptocurrency — criminal punishment, the maximum measure is up to 4 years of imprisonment; status: proposed by the draft law.
- Operations with bitcoins and other cryptocurrencies — a fine of up to 500,000 rubles or corrective labor for up to 2 years; status: previously proposed.
Imprisonment for up to 4 years should become the maximum measure for those who issue or exchange such assets. Essentially, bitcoin and similar digital instruments are proposed to be moved out of the area of ambiguous regulation into the realm governed by the Criminal Code of the Russian Federation.
For the market, this means an attempt to integrate the topic of digital money into criminal legislation. If the project passes government procedures, the Government Commission on Legislative Activities and the State Duma will assess how exactly to formalize the ban and which actions should be considered punishable.
Why the Authorities Are Talking About Stricter Punishment
The reason for tightening may have been the idea of a major payment service to issue its own digital currency, an analogue of bitcoin. In September 2015, the company announced the development of ‘bitrubles,’ after which the discussion around cryptocurrencies became noticeably sharper.
Law enforcement agencies are strongly opposed to such instruments. Their main argument is that bitcoins, along with other payment systems, are used in drug trafficking. In this logic, the crime is associated not only with the circulation of digital money itself but also with the ability to conceal transactions.
In the discussion of such risks, structures responsible for financial control and security inevitably become involved:
- Bank of Russia.
- Federal Tax Service of Russia.
- Federal Security Service.
- Investigative Committee of the Russian Federation.
At this moment, Russia is essentially choosing whether to consider cryptocurrency an acceptable payment instrument or a source of criminal risk.
Context: Vladimir Putin’s Position and the EU Court Decision
At the same time, earlier Vladimir Putin did not see cryptocurrencies as an unequivocally negative phenomenon. In July 2015, he said that bitcoins and other cryptocurrencies are not officially tied to anything and are not backed by anything, but in certain types of transactions, their use may be acceptable.
At the international level, the approach looks softer. The European Union Court ruled that operations with bitcoins and other virtual currencies in the EU should not be subject to VAT. Thus, digital assets were effectively brought closer to traditional money.
Currency in the usual sense remains under state control, but the debate around bitcoin shows that digital instruments are rapidly changing the boundaries of financial regulation. The Finance Ministry’s draft law is planned to be submitted to the State Duma in the coming months.
