Recently the Russian State Duma adopted amendments to the law "On Information, Information Technologies and Information Security" that will enable Moscow to tighten its grip on the Internet.

The Russian authorities claim that the Internet threatens state sovereignty since it is border-agnostic and, thus, attackers pose a risk to national security as they operate from abroad.

Now, the new legislation is attempting to cordon off Russia’s Internet. It obliges companies to store personal data on Russian users on servers located in Russia only. Moreover, companies will have to report to Roskomnadzor (Federal Service for Supervision in the Sphere of Telecom, Information Technologies and Mass Communications). Roskomnadzor has the right to fine companies 300,000 rubles (about US$5,000) that violate the new law.

The new law has caused alarm among major Internet companies such as Facebook, Twitter and Google. However, it is yet unclear what kind of impact the law will have on the Internet in Russia. Many companies have refused to follow these measures, while some have expressed full readiness to comply with the new legislation. Regardless, foreign companies that do not have a server in Russia may face difficulties and this could lead some companies to move their business elsewhere in BitLicense fashion.

Roskomnadzor has a long track record of shutting down websites the state deems “a threat” to national security. For example, the agency blocked access to one Russian webpage on Wikipedia because it contains information about cannabis. It has also carried out several bans of cryptocurrency related resources. Previously, the agency blacklisted several popular Bitcoin-related websites in Russia, though this decision was later overturned.  

Despite all the problems that Bitcoin-related companies face in Russia, the country’s general attitude toward digital currencies seems to be improving. Last week, the volume on LocalBitcoins in Russia hit an all time high. But while this may not be related to the newly introduced law, it will be interesting to see how it affects cryptocurrency uptake within the country moving forward.