Despite Russia recently passing its first major legislation devoted to cryptocurrencies, the country’s central bank continues to treat the industry as a criminal area.

Sergei Shvetsov, the first deputy governor at the Bank of Russia, has voiced the bank’s negative stance towards crypto investment. He compared cryptocurrency with financial pyramid schemes and roulette games. The official provided his remarks on the crypto industry during a July 28 live YouTube stream regarding Russia’s new bill on categories of retail investors.

During the live session, Shvetsov emphasized that the Bank of Russia does not recognize crypto purchases as an investment. He said:

“The Bank of Russia, as a regulator, adheres to the position that crypto purchases are not an investment. It is more like a financial pyramid or roulette games, and does not apply to the financial market. Either government or financial intermediaries should not encourage citizens to acquire cryptocurrencies.”

“We do not support investment in this criminal sector”

Comparing cryptocurrencies with “money surrogates,” Shvetsov argued that no central bank around the world supports such money substitutes. “They are prohibited by the Russian Constitution and subject to criminal liability,” Shvetsov continued.

The executive continued that cryptocurrencies like Bitcoin (BTC) are often used for illicit activities like money laundering, and thus should not be supported by the bank. The official said:

"Cryptocurrencies are also used to circumvent Anti-Money Laundering regulations. Therefore, we absolutely do not support citizens' investment in this criminal sector."

Main regulation is still on the way

The Bank of Russia’s latest comments come shortly after Russian lawmakers passed a major crypto bill, “On Digital Assets,” or DFA, on July 22. However, the DFA bill does not envision the actual regulation of the industry. Regulatory framework is planned to be part of another upcoming bill, titled “On Digital Currency.”

Prohibiting the use of crypto as a payment method, the DFA bill does not provide much information about cryptocurrency investments. In the meantime, the Bank of Russia is a key regulator mentioned in the bill document, authorizing the bank to define what types of investors are eligible for investing in this or that crypto product.

Global central banks fighting against crypto

Similarly to other central banks over the world, Russia’s central bank has been desperately confronting legalization of cryptocurrencies like Bitcoin.

In March 2020, the bank argued that the DFA bill will ban the issuance and circulation of crypto in Russia. The bill ultimately turned out to be less hostile to the industry. In February 2020, the bank issued a set of rules for suspicious transactions, categorizing any crypto-related transaction as a potential money laundering risk.

Russia’s central bank is not alone in its negative stance towards crypto. A number of banks around the world, including India’s RBI have been trying to ban cryptocurrencies like Bitcoin in order to confront the new decentralized assets. However, even India’s central bank eventually reversed its decision when the Supreme Court lifted RBI’s ban in March 2020. Other global authorities that have explicitly banned crypto are the central banks of Myanmar and Zimbabwe.