Russia Plans to Confiscate Cryptocurrencies Used in Illicit Activities By 2021

Financial regulators in Russia are seeking to create a new legal framework to allow security agencies in the country to seize cryptocurrencies used in illicit activities. 

Sources familiar with the matter noted that the country’s Ministry of Internal Affairs, in collaboration with other security agencies, will work toward amending the existing legal framework to enable the confiscation of cryptocurrencies by December 31, 2021.  

As per a RBC report today, the parties involved in drafting the regulation include the Prosecutor General’s Office, the Investigative Committee, the Justice Ministry, the FSB, the Federal Customs Service, and the Federal Security Service.

Nikita Kulikov, head of a dedicated committee at the Russian parliament, was quoted as saying in the report: 

The constant growth trend in crimes using virtual assets, and the lack of consumer protection in the face of this kind of criminal onslaught, naturally dictate the need to develop mechanisms for legal regulation and control of virtual asset exchange.

The report highlighted that cryptocurrencies, especially Bitcoin (BTC), had been used over the years to conduct cybercrime, including money laundering, terrorist financing, among others. 

The sources reiterated that the move can only be effective when cryptos are fully regulated in the country and treated as legal tender or a commodity in order to enable security agencies to have the backing of the law to confiscate them. 

The officials acknowledged that it would be challenging to confiscate investors’ cryptocurrencies held in crypto wallets because it would require the investor’s private keys to gain access. 

However, the regulators believe things will be much easier if the tokens are stored in exchanges operating within the country’s jurisdiction, as they can easily request the exchange to block the funds in a fraudulent account. 

”All crypto exchanges operating outside the Russian jurisdiction, […] can ignore such requests,” the report added. 

Coinfomania published last month that a top official of the country’s Ministry of Finance revealed that plans are ongoing to regulate cryptocurrencies in the country based on three categories, such as Technical Tokens, Virtual Assets, and Digital Financial Assets.

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