Key Points
- Russia’s Investigative Committee proposes legislation to recognize cryptocurrency as property and criminalize its transfer through third parties.
- The proposed amendments aim to clarify how cryptocurrency is treated in criminal investigations and could potentially affect the country’s crypto market.
Russia’s primary federal investigative body, the Investigative Committee, has suggested a legislative change that could have significant implications for the nation’s digital currency market. In early February, the committee’s Chairman, Alexander Bastrykin, announced that they had proposed the legal recognition of cryptocurrency as property, according to Russian news outlet Interfax.
Additionally, Bastrykin suggested the possibility of criminal responsibility for transferring electronic payment tools to third parties. The interpretation of this term by Russian legal experts varies, but it is clear that if approved, these changes would establish explicit rules on how digital currency could be seized or confiscated during inquiries.
Implications of the Proposed Legislation
Currently, there are no standardized procedures in Russian law for dealing with cryptocurrency in criminal cases. This could change with the proposed amendments, which would officially classify crypto as property, enabling authorities to treat it as evidence. The new rules would also provide guidelines for freezing and confiscating cryptocurrencies.
One critical issue the committee is addressing is the illicit use of third-party bank accounts, often known as “droppers,” to facilitate cryptocurrency transactions. This is why authorities suggest criminal liability. Under Russia’s law, electronic payment instruments refer to methods that allow individuals to manage and transfer funds through electronic systems, such as banking cards or digital wallets. But with cryptocurrency, law enforcement faces technical difficulties in identifying and tracking illegal transactions.
Vladimir Sobinsky, a legal expert at DRC, a law firm that represented Binance in 2020, explained that the issue lies in how crypto is purchased in Russia. Many crypto beginners rely on peer-to-peer services of centralized crypto exchanges.
Legal Clarifications Needed
While the idea of criminal liability for transferring electronic payment instruments is clear, whether it applies to crypto wallets is not. According to Sobinsky, crypto wallets are not considered electronic payment instruments. However, Nevsky IP Law, another Russian firm that also represented Binance in court, believes they are.
Ruslan Gafurov, a partner at Nevsky IP Law, noted that the phenomenon of “droppers” is common in Russia’s banking card sector. He expressed that the issue “is not as simple as it may seem at first glance.”
Gafurov also pointed out that the proposed amendments may be necessary to address specific procedural issues related to cryptocurrency in criminal law. For instance, these amendments could shed light on the confiscation and seizure of cryptocurrencies.
Sobinsky added that Russian law enforcement has faced many challenges so far, from tracking stolen crypto to returning it to victims. Both law firms agree that while recognizing crypto as property isn’t new, the proposed changes would bring more clarity to criminal investigations. They believe the laws should also address practical issues, like how crypto can be seized, frozen, or used as evidence in criminal cases.
