Russia

CoinList agrees to $1.2M settlement over apparent US sanctions violations

The crypto exchange processed 989 transactions for users in Crimea from April 2020 to May 2022, according to the Office of Foreign Assets Control.

CoinList, a United States-based cryptocurrency exchange, has agreed to a $1.2-million settlement with the Treasury’s Office of Foreign Assets Control (OFAC) following allegations the firm facilitated transactions in apparent sanctions violations.

In a Dec. 13 notice, OFAC said CoinList had processed 989 transactions for users in Crimea — the peninsula formerly a part of Ukraine currently occupied by Russia — from April 2020 to May 2022. OFAC said the apparent sanctions violations were “non-egregious” but “not voluntarily self-disclosed.”

“[CoinList’s] screening procedures failed to capture users who represented themselves as resident of a non-embargoed country but who nevertheless provided an address within Crimea,” said OFAC. “In particular, [CoinList] opened 89 accounts for customers, nearly all of whom had specified ‘Russia’ as their country of residence but all of whom provided addresses in Crimea upon account opening.”

Russia debuts cross-border payments in Tether stablecoin

In addition to Tether, companies transacting through the Exved system can use the U.S. dollar and the offshore ruble, the platform said.

One of Russia’s first cross-border payment platforms has officially announced its launch and says it will facilitate local legal entities to process international settlements in cryptocurrency.

Exved, a local digital settlement platform — which describes itself as a “digital counterparty search system” — announced the launch on Dec. 7, stating that Russian importers and exporters can now use its business-to-business solution to simplify the process of “foreign exchange operations and foreign economic activity.”

The Exved platform specifically allows one to proceed with cross-border transactions using the Tether (USDT) stablecoin alongside the offshore ruble and the United States dollar, the announcement reads.

Foreign trade and pensions: What’s next for Russia’s CBDC project?

The Russian digital ruble pilot launch was delayed until at least May, but the government still hopes to kick off the currency in 2024.

The pilot for Russia’s central bank digital currency (CBDC) pilot should have been launched on April 1, but it was delayed at practically the last moment due to the slow pace of the necessary associated legislation passing through parliament.

However, with the launch of the pilot still possible in May and the general roll-out of the digital ruble scheduled for 2024, the Russian project remains one of the most important CBDC developments to watch — especially given its possible role in cross-border payments between BRICS countries (Brazil, Russia, India, China and South Africa) and the intent to include it in the massive state-controlled pension system.

A brief timeline of Russia’s CBDC

The first time the Bank of Russia, the country’s central bank, announced its plans to explore the possibility of issuing a digital currency was in 2017. Back then, the bank’s first deputy governor, Olga Skorobogatova, said a CBDC would be a priority for the bank and that it would be looking into it in the near future.

However, at the time, Skorobogatova’s boss — Bank of Russia Governor Elvira Nabiullina — refused to acknowledge it as a “top priority,” instead calling it “a medium-term, or, perhaps, a long-term” prospect.

In 2022, the Bank of Russia revealed it planned to roll out the digital ruble across all banks in the country by 2024. The bank said the implementation would take place in stages and involve extensive testing and infrastructure development. It stated that the digital ruble would coexist with cash and non-cash payment systems, providing consumers more flexibility.

Perhaps the most significant factor in accelerating the CBDC’s development was the need for a reliable tool for foreign trade and settlement following Russia’s invasion of Ukraine and the subsequent sanctions implemented by several countries worldwide.

Magazine: Crypto regulation: Does SEC Chair Gary Gensler have the final say?

By early 2023, local media was reporting that the Bank Of Russia had begun studying two possible cross-border settlement models with the digital ruble.

In February 2023, Skorobogatova publicly announced that the first consumer pilot for the CBDC would take place on April 1, 2023. The experiment would involve 13 local banks and several merchants, as well as real consumers — though it would be limited to the employees of participating companies.

Russian state media subsequently reported that the pilot was delayed pending the passage of specific legislation by the State Duma, the lower chamber of the Russian parliament. The legislation will reportedly come into force no earlier than the beginning of May.

Elena Klyuchareva, senior associate at Russian law firm KKMP, told Cointelegraph that two laws would enable the digital ruble launch. The first is a bill on amendments to the Civil Code, which determines the legal nature of the digital ruble as “a form of non-cash money and contractual relations arising from the use of a digital account.”

The second is a bill on amendments to several laws, the main one being the “Law on National Payment System.” These amendments stipulate the basis for the functioning of the digital ruble platform and the responsibilities of its participants.

Both bills were adopted in the first reading by the State Duma on March 16, 2023. The term for commenting expired on April 14, 2023. “We may expect the continuation of its discussion soon, most likely in May,” Klyuchareva added.

Digitalization and retirees’ anxiety

Governor Nabiullina herself first suggested using the digital ruble in pension payments back in 2021, with few details regarding how it would work.

Discussions around the idea resurfaced at the end of March 2023 as the state-controlled Izvestia newspaper once again teased the CBDC pilot. Several weeks later, Nabiullina had to clarify that the digital ruble wouldn’t be the principal or even the common currency for pension payments but an additional option.

The pension system, for which the state is primarily responsible, is a traditionally sensitive area of politics and economics in Russia. With the elderly often being far from tech-savvy, the mention of something “digital” can provoke anxiety. However, Chris Emms, a former business developer at Bitcoin.com who now lives in Russia, said:

“The average Russian pensioner will still be able to spend their money in the exact same way and likely won’t even realize that their money is digital.”

Aleksandr Podobnykh, head of the Saint Petersburg branch of the Association of Chief Information Security Officers, also doesn’t see any potential tension.

He told Cointelegraph that while many citizens, including pensioners, will eventually interact with the digital ruble, the government will probably use some kind of incentivization policy to help people switch to the digital form of money. In fact, digitalization has been a priority for quite some time.

“Today, there are a huge number of initiatives and events aimed at improving the culture of citizens in the field of digital technologies and electronic services. Special attention is also paid to information on investment and security issues in this area,” Podobnykh said.

Will the digital ruble find adoption?

Will the digital ruble significantly affect the use of private cryptocurrencies in the country? All over the world, CBDCs are under development, and the crypto community at large perceives this as governments’ answer to the rise of digital money.

The Russian central bank has been highly hostile to any idea of legalizing crypto and even fought the Ministry of Finance on the matter. Podobnykh has no doubts about the bank’s plans regarding the new currency:

“Undoubtedly, with such an emphasis of the central bank on the monopoly use of the ruble, its position will remain strong. And don’t forget the plans to use it in calculations in the CSTO [Collective Security Treaty Organization] and BRICS countries.”

Emms sees the launch of the CBDC as a type of compromise between the anti-crypto central bank and the Russian politicians in the Duma who are “taking a positive stance over crypto regulation in general.” He believes the central bank hopes Russians will “choose to put their money into CBDC instead of buying high-risk altcoins.”

Recent: Connecting DeFi: How multichain token systems can improve liquidity

Klyuchareva said that the Bank of Russia expects the digital ruble to replace cryptocurrencies within Russia and be more popular as a safer instrument for settlements and investment. “Whether this expectation will come to life remains to be seen,” she concluded.

Speaking to the members of one of the parliamentary parties on April 17, Nabiullina didn’t refute the possibility of using cryptocurrency in foreign trade. Strangely enough, she didn’t specify whether this cryptocurrency would be private or issued by the central bank but mentioned the creation of “special entities responsible for mining.”

That makes the central bank’s stance on the digital ruble and private crypto less transparent — the “experimental” plan to mine some currency and the testing of a national CBDC for cross-border settlements seem to contradict each other. But one thing is certain, in Nabiullina’s words:

“Cryptocurrency shouldn’t be used inside the country.”

Russia talks up prospects of BRICS countries developing new currency

A top Russian official has reportedly claimed that the countries of the BRICS alliance — Brazil, Russia, India, China and South Africa — are working on creating their own currency.

A new world order could be emerging as economic powerhouses increase their efforts to distance themselves from US dollar hegemony.

According to reports, a top Russian official has claimed that the BRICS alliance is working on creating its own currency. BRICS is an acronym for five leading emerging economies: Brazil, Russia, India, China and South Africa.

State Duma Deputy Chairman Alexander Babakov made the comments at the St. Petersburg International Economic Forum event in New Delhi, India, according to local reports.

Babakov reportedly stressed the importance of both nations working towards a new medium for payments, adding that digital payments could be the most promising and viable.

He also said the currency could benefit China and other BRICS members, and not the West.

“Its composition should be based on inducting new monetary ties established on a strategy that does not defend the U.S.’s dollar or euro, but rather forms a new currency competent of benefiting our shared objectives.”

Babakov also reportedly postulated that the new currency would be secured by gold and other commodities such as rare-earth elements.

*Countries in the grouping. Source: Library of Congress*

This week, former Goldman Sachs chief economist Jim O’Neill called on the BRICS bloc to expand and challenge the dominance of the dollar. In a paper published in the Global Policy journal, he wrote that “the U.S. dollar plays a far too dominant role in global finance.”

A BRICS currency is not a new concept. In 2019, Cointelegraph reported that members of the bloc were discussing the creation of a new digital currency for a unified payments system.

In a related development this week, China and Brazil reached a deal to trade in their own currencies. The move will remove the U.S. dollar as the intermediary, further empowering both nations to distance themselves from the world’s reserve currency.

According to reports, the agreement will enable China and the biggest economy in Latin America, Brazil, to conduct trade and financial transactions directly. Chinese yuan will be exchanged directly for the Brazilian real and vice versa instead of going through the greenback.

China is racing ahead with its central bank digital currency project, and crypto adoption in Brazil is growing following the legalization of it as a payment method in the country late last year. Meanwhile, Uncle Sam remains determined to continue its war on crypto as financial regulators tighten the screws on the embryonic industry.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

Russia delays digital ruble launch testing due to lawmaking process

The participating banks expressed their readiness to proceed with the CBDC pilot.

The rollout of The Bank of Russia’s central bank digital currency (CBDC) pilot is being delayed indefinitely. However, participating banks have stated their readiness to begin the testing.

As reported by the state-owned TASS on March 28, the CBDC pilot won’t start on April 1, as previously announced , because specific legislation has only passed through the first reading in the State Duma — the Federal Assembly’s lower house. According to TASS, the legislation may be enacted by early May.

The number of private banks participating in the pilot has also changed from 15 to 13. Some of the banks’ employees would become the test participants for CBDC retail payments, as well as one of the largest insurance companies in the country, Ingosstrakh.

Bank executives expressed enthusiasm for the project. The director of innovations at Sinara Bank, Vitaly Kopysov, told journalists:

“The use of smart contracts should reduce the operational load of banks and make the deals transparent, which not only will reduce the chances of the misuse of government and banks’ funds, but ultimately simplify the control over the existing contracts.”

The upcoming pilot will involve real operations and consumers, although it will be limited in scale. The general public will be unable to participate in the first stage, as the banks will enter the pilot with chosen customers. Following the first stage, the Bank of Russia intends to determine how to scale the digital ruble further.

Initially scheduled for 2024, the consumer CBDC pilot was moved to an earlier date as the Russian central bank sought an alternative to the SWIFT payments system amid Western economic sanctions against Russia.

Magazine: Justin Sun vs. SEC, Do Kwon arrested, 180M player game taps Polygon: Asia Express

Seized exchange Bitzlato allows users to withdraw 50% of Bitcoin

Bitzlato has yet to resolve the issue with the remaining 50% of user funds and may eventually compensate using its own funds.

Russia-linked cryptocurrency exchange Bitzlato has partially restored access to user funds despite being officially seized by European authorities.

Bitzlato has enabled its users to withdraw up to 50% of assets stuck on the platform due to enforcement from the United States and Europol, the firm announced on its Telegram channel on March 20.

According to the statement, Bitzlato users can now restore half of their assets using the Telegram bot — bz_phoenix_bot — which allows users to move assets from the web Bitzlato account to an external wallet or exchange.

All withdrawals from Bitzlato are processed in Bitcoin (BTC), as the platform converted all altcoin holdings by users into BTC when the service was halted on Jan. 18. According to the firm, Bitzlato had to convert user balances to Bitcoin due to technical difficulties associated with servicing multiple altcoins after Bitzlato was seized.

In a public Bitzlato chat, several alleged Bitzlato users said they were able to move their Bitcoin to exchanges like ByBit and Binance. Some alleged Bitzlato clients also reportedly used software wallets like Trust Wallet and ViaBtc, and hardware wallets like Ledger, to withdraw their Bitcoin.

Bitzlato’s 50% withdrawal option follows its previously announced roadmap on restoring users’ access to the platform and resuming operations. According to the plan, Bitzlato will continue its work to restore the platform and aims to provide a service for peer-to-peer (P2P) cryptocurrency trading by early April 2023.

A number of users have preferred not to withdraw 50% of their assets from Bitzlato this time, opting to wait until the exchange restores P2P trading. Once the P2P platform is restored, users will be able to access all previously available functions, a spokesperson for Bitzlato told Cointelegraph.

Bitzlato users should not expect to recover the remaining 50% of their assets once the P2P exchange is launched, the representative said.

“There will be no second half once the P2P is opened since these are two unrelated questions and processes,” the Bitzlato spokesperson added.

According to the representative, the issue with client funds has not yet been resolved, but Bitzlato plans to return the money either by restoring access to seized funds by Europol or from the company’s funds. The spokesperson said:

“Lawyers have disputed the decision of the French government, and if the outcome is favorable, the funds will be returned […] If it does not work out, the users have to wait until the firm earns enough to compensate for the losses.”

As previously reported, the United States Department of Justice announced a major international crypto enforcement action against Bitzlato in mid-January. Europol subsequently said that European authorities seized more than $19 million in crypto from Bitzlato as part of the enforcement actions.

Blockchain is the answer to Russia’s settlement issues, banking exec says

There is no technical reason preventing Russia from creating its own blockchain-based system, blockchain provider Fuse Network’s CEO believes.

The adoption of blockchain is the right direction for Russia to solve its current settlement issues, according to an executive at Russia’s largest bank, Sberbank.

Blockchain technology has matured over the past few years to offer new capabilities that potentially enable Russia to create more efficient payment systems, Sberbank first deputy chairman Alexander Vedyakhin said.

On March 14, Vedyakhin took part in the meeting of Russia’s Federation Council on the budget and financial markets committee, highlighting the promising future of blockchain in Russia, the local news agency Interfax reported.

According to Vedyakhin, distributed ledger technology (DLT) is a great foundation for a new payment system due to its decentralized nature and privacy-enabling features. He stated:

“Because it’s a distributed ledger, there is no single point of decision-making, no center, no switch that can be turned off; everyone has records of everything, and there are special protocols that allow you to do this confidentially.”

Vedyakhin added that Sberbank is currently actively exploring the implementation of blockchain technology for payments. “We are confident that Sberbank and other colleagues from the central bank will find this solution,” he stated, expressing confidence that blockchain will become more relevant in 2023. The Sberbank executive said:

“Next-generation payment systems will be on blockchain.”

In his speech, Vedyakhin also noted that blockchain technology has rapidly evolved over the past few years, with developers managing to find solutions to issues, such limited scalability and limited privacy. These blockchain issues have been solved so far, he added.

According to Mark Smargon, CEO of the permissionless public ledger project Fuse Network, there is no technical reason preventing Russia from creating its own blockchain-based system.

“Major adoption by mainstream businesses and their consumers is right around the corner thanks to recent developments in scaling and privacy technology, notably on EVM [Ethereum Virtual Machine]-compatible systems, which have become the standard for experimentation,” Smargon said in a statement to Cointelegraph.

He noted that fully online real-time technology for cross-border payment settlement is “only a matter of time,” with technology significantly maturing over the past few years. At the same time, Smargon questioned whether blockchain could enable economies to bypass international sanctions, stating:

“It needs to be clarified when this technology will become widely adopted and whether it will enable users to bypass international sanctions. Blockchain enables better transparency, and disintermediation is not only a solution for illicit activities.”

The news comes amid Sberbank finalizing its Ethereum-based decentralized finance platform, which it plans to trial by May 2023. Russia’s largest bank has also been working on an international settlement platform that would serve as an alternative to SWIFT. According to Sberbank CEO German Gref, the company plans to finalize its configuration in 2023.

US REPO task force names crypto as target in efforts involving $58B in sanctioned assets

Members of the task force have worked to “counter Russian sanctions evasion,” which included illicit crypto transactions and money laundering schemes.

The United States Treasury has announced deputies of the multilateral Russian Elites, Proxies and Oligarchs (REPO) Task Force have targeted crypto in Russian entities’ attempts to evade sanctions.

In a March 9 announcement, the U.S. Treasury said the task force had blocked or frozen more than $58 billion worth of assets subject to sanctions since Russia’s military invaded Ukraine in February 2022. Members of the REPO team have worked to “counter Russian sanctions evasion,” which included illicit crypto transactions.

“As Russia’s war of aggression continues, REPO members remain determined in their commitment to impose steep costs on Russia,” said the task force. “REPO will continue to identify, locate, and freeze the assets of sanctioned Russians, with the aim of depriving the Kremlin of the funds it needs to fight its illegal war.”

Since the conflict in Ukraine began in February 2022, the U.S. Treasury’s Office of Foreign Assets Control as well as counterparts in the European Union have imposed strict sanctions against entities tied to Russia in an effort to slow down the war machine. However, according to a Chainalysis report on the one-year anniversary of the war, pro-Kremlin groups and propaganda outlets were able to use crypto transactions to raise roughly $5 million for their cause.

REPO added that assets tied to Russia under its members’ jurisdictions would remain “immobilized” until an end to the conflict. At the time of publication, there is no sign of the war abating, with large swaths of Ukrainian territory under Russian occupation and many cities in Ukraine at risk of attack.

Russian crypto advocates urge Putin to stop regulatory hostility

Russia’s existing regulatory stance on the cryptocurrency industry would potentially lead the country to “direct financial losses,” the RACIB argued.

As Russia continues to delay adopting cryptocurrency regulations, local advocates have appealed to Russian President Vladimir Putin to change the government’s approach to regulating the market.

The Russian Association of Crypto Industry and Blockchain (RACIB) — a major group of crypto and blockchain enthusiasts in Russia — issued an open letter to Putin on March 6, urging the president to address the risks of ignoring the global development of the crypto industry.

In the letter, the RACIB argued that Russia has been too slow to implement experimental legal regimes targeting crypto adoption despite enforcing its first crypto law, “On Digital Financial Assets,” in 2021.

In November 2022, lawmakers in Russia introduced a series of legal amendments to the crypto law, proposing to launch a “national cryptocurrency exchange.” According to the RACIB, some of those amendments would significantly complicate the implementation of digital financial technologies in Russia as they introduce criminal sanctions for local blockchain developers.

The proposed amendments would give Russian enforcement authorities a “sea of choice” to pressure the local crypto community, the RACIB’s executive director Alexander Brazhnikov told Cointelegraph.

“It will not be easy for companies in the digital asset industry to prove that they are doing everything within the framework of the Russian legislation,” Brazhnikov stated.

The RACIB has ultimately called for Putin to put an end to Russia’s hostile regulatory stance on crypto, as it prevents local businesses from fully using the potential of crypto and would potentially lead the country to “direct financial losses.” The RACIB stated:

“The existing state policy around the regulation of digital financial assets creates serious risks for the Russian economy to lag behind not only unfriendly, but also friendly countries due to delaying the introduction of new financial technologies.”

According to the RACIB, one of the biggest risks behind ignoring the benefits of the crypto industry is the relocation of local talent to advanced jurisdictions, including Eurasian Economic Union (EAEU) countries like Kazakhstan and Armenia.

To help Russia change its tough regulation stance on crypto, the RACIB has asked Putin to build a working group, including representatives of the digital asset community, to collaborate with the government on building the state’s crypto regulation policy. The group has specifically expressed interest in developing and applying cross-border payment systems in Russia, EAEU jurisdictions, as well as other countries like Brazil, India, China and South Africa.

In 2021, RACIB’s Yury Pripachkin argued that Russia was doing “absolutely nothing” to regulate the local cryptocurrency market.

The news comes soon after the Russian central bank reiterated its uncompromised stance on crypto, with Elizaveta Danilova, head of Bank of Russia’s financial stability department, arguing that legalization of crypto investments threatens the welfare of Russian citizens. At the same time, the Bank of Russia sees no problem in legalizing crypto mining and allowing crypto use in cross-border transactions.

Iran completes pre-pilot phase of central bank digital currency

The Central Bank of Iran progresses with CBDC development in anticipation of a visit by the Bank of Russia’s governor Elvira Nabiullina.

Iran is moving forward with its central bank digital currency (CBDC) plans, completing preliminary research for the launch of a potential digital rial.

The Central Bank of Iran (CBI) has completed a pre-pilot phase in the development of Iran’s CBDC, according to an official statement by CBI’s research arm, the Monetary and Banking Research Institute (MBRI).

Mohammad Reza Mani Yekta, head of the CBI office for supervising payment systems, announced the news at the ninth annual conference on electronic banking and payment systems on Feb. 20. He noted that Iran’s central bank plans to increase the scope of the CBDC pilot in the country’s payment system, but doesn’t want to rush its implementation.

“The pre-pilot phase ended successfully with valuable achievements. The project will soon be launched in other ecosystems and will be used by more users,” Mani Yekta stated.

The executive pointed out that the rules governing a potential digital rial will align with those established for rial banknotes. Mani Yekta also noted that a digital rial would be distributed among individuals and banks, with the CBDC infrastructure recreating some blockchain features.

Mani Yekta reportedly said that ten banks in Iran have applied to join the digital rial project. Banks like Bank Melli, Bank Mellat and Bank Tejarat were involved in the experimental phase. All banks and credit institutions in Iran are reportedly expected to start offering electronic wallets for using the upcoming digital currency.

As previously reported, the CBI started planning to launch a CBDC pilot in January 2022, following years of initial research since 2017. The regulator reportedly started rolling out a CBDC pilot in September 2022, aiming to improve financial inclusion and compete with global stablecoins.

Iran’s digital rial project, called the “crypto rial,” is pegged to the national currency, the Iranian rial, at a 1:1 ratio. The digital currency reportedly runs on a platform known as Borna, which was developed using Hyperledger Fabric, the open-source enterprise blockchain platform established by United States technology giant IBM.

The news comes amid the Iranian authorities preparing to hold an official meeting with the Bank of Russia’s governor Elvira Nabiullina, who is expected to visit Iran in the near future. Russia and Iran have reportedly been working together to create a gold-backed stablecoin that would serve as a payment method in foreign trade.