Proposed Legislation in Russia Could Criminalize Bitcoin Transfers Through Third Parties

Moscow, Russia — Russia’s primary federal investigative authority, the Investigative Committee, has introduced a proposal that may transform the landscape of the country’s cryptocurrency regulations. During an extended board meeting in early February, Chairman Alexander Bastrykin announced that the committee is advocating for the legal recognition of cryptocurrency as property, a move that could have far-reaching implications for the burgeoning crypto market in Russia.

Recognition of Cryptocurrency as Property

The proposal from the Investigative Committee aims to provide a clearer legal framework surrounding cryptocurrency and delineate its treatment within the scope of property law. By officially classifying crypto as property, authorities would be able to manage and treat it as evidence during investigations, potentially leading to new procedures for freezing and confiscating digital assets.

‘A standardized approach is crucial,’ Bastrykin stated. ‘Current law lacks clarity on how to handle these assets during criminal cases.’

The proposed amendments are particularly significant because they address the current ambiguity surrounding the handling of cryptocurrencies in the legal system. To date, there has been no consistent method for dealing with digital currency, which could change if the new regulations are passed.

Criminal Liability for Transfers Through Third-Party Accounts

A key focus of the proposal is the illegal use of third-party bank accounts, often termed ‘droppers,’ that facilitate cryptocurrency transactions. The Investigative Committee has suggested introducing criminal liability for those who transfer electronic payment instruments through these accounts.

Legal experts are divided on whether cryptocurrency fits under the definition of electronic payment instruments, which currently pertain to devices like banking cards and digital wallets. However, the proposed framework would provide a structured manner for authorities to seize or confiscate cryptocurrency in connection with their investigations.

Vladimir Sobinsky, a legal expert at DRC law firm, noted the challenges inherent in Russia’s crypto-buying practices. Many individuals new to cryptocurrency often resort to peer-to-peer services via centralized exchanges, a method that involves ‘buying access’ to another person’s banking app due to restrictions limiting direct purchases. This reliance on third-party services brings users perilously close to the proposed criminalization, especially as many of these intermediaries are often young individuals or migrants motivated by financial gain.

Rising Digital Crimes Linked to Cryptocurrency

Recent statistics from Russia’s Investigative Committee reveal an alarming trend: a 10% increase in digital crimes in 2024 compared to the previous year, with a notable portion of these offenses being committed by individuals below the legal age of majority. While it remains ambiguous how many of these incidents involve cryptocurrency, the findings underscore the urgent need for robust regulation and legal clarity.

‘Many users resort to using droppers when their accounts are blocked due to frequently conducting crypto transactions,’ Sobinsky emphasized. ‘This makes it clear that criminalizing this practice is an attempt to mitigate the rising tide of crypto-related crime.’

Legal Implications and Clarity Needed

Despite the push for criminal liability related to electronic payment instruments, there are ongoing discussions about whether this includes crypto wallets, with expert opinions varying. Some argue that while cryptocurrency wallets are not currently classified under the same category, there is potential for them to be included under forthcoming regulations.

Ruslan Gafurov, a partner at Nevsky IP Law, commented on the existing recognition of cryptocurrency as property in civil and tax contexts. He stated that while the proposed amendments aim to provide direction for handling cryptocurrencies in criminal law, they also need to address how such digital assets can be frozen, seized, or deployed as evidence in legal proceedings.

‘Merely recognizing cryptocurrency as property is insufficient,’ Gafurov noted. ‘The amendments must clarify the procedural aspects regarding these assets during investigations.’

Conclusion

The proposed legislation by Russia’s Investigative Committee illustrates the nation’s attempt to grapple with the complexities of cryptocurrency regulation amid rising digital crimes. If instituted, these amendments could offer a more comprehensive framework for the treatment of cryptocurrencies within the legal system. As the situation unfolds, further clarity around the specifics of these proposed changes, including the definition of electronic payment instruments and the operational details for law enforcement, will be critical in shaping the future of cryptocurrency in Russia.

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