Russia plans harsh crypto penalties reminiscent of Soviet controls

Russia should criminalize foreign exchange operations, including cryptocurrency transactions, according to a consultative body that monitors the legislative process in the country.

The idea, which is likely to be met with serious opposition from free market proponents, is evoking associations with penalties that threatened citizens of the USSR who dared to touch the dollar or any other convertible currency.

Civic chamber suggests criminal prosecution for crypto payments

Government oversight will improve, in terms of cracking down on financial offenses, if illegal foreign exchange transactions, including those with cryptocurrencies, are criminalized.

That’s according to Evgeny Masharov, a member of the Commission for Public Review of Bills and Other Regulatory Acts at the Civic Chamber of the Russian Federation.

The public advisor backed his conclusion by providing a number of examples of criminal cases involving such violations that Russia’s Federal Security Service (FSB) is regularly dealing with.

He listed them in an interview with the TASS news agency on Friday:

“The daily detentions of officials of various ranks by the FSB, the dismantling of terrorist cells, and the arrests of Russian citizens for crypto transfers to support Ukrainian armed forces demonstrate the need to introduce criminal liability for illegal foreign exchange transactions, including digital currency transactions.”

Also quoted by the crypto news outlet Bits.media, Masharov emphasized that transactions with cryptocurrencies like Bitcoin deserve special attention, as they are often used for illegal anonymous payments and to conceal crime.

The member of the Civic Chamber suggests adding new provisions for these offenses to the country’s Criminal Code. He also believes that all these cases should be investigated by the FSB.

The Federal Security Service of the Russian Federation is the main successor to the Soviet Union’s Committee for State Security, better known as KGB.

In the old days, the latter was feared as a powerful repressive machine that went after dissidents, but also ordinary citizens who dared to break the law, including currency controls in the totalitarian system.

The Civic Chamber is a consultative institution of the civil society in Russia, created in 2005 after President Vladimir Putin proposed its establishment the previous year.

It analyzes draft legislation and oversees the activities of the Russian parliament, the government, and other bodies of the executive power, on both federal and regional level.

Masharov expects criticism over reviving Soviet-era restrictions

Evgeny Masharov admitted his proposal is likely to be criticized for similarities to currency exchange rules enforced in the former USSR. He commented:

“Critics and free market advocates may say this is a return to Soviet times, a desire to control everyone. Only, statistics and law enforcement practice tell a different story.”

The member of the Civic Chamber’s legislative commission clarified he was referring to the confiscation of huge amounts of foreign cash in Russia and the storage of billions of rubles’ worth of cryptocurrency in the digital wallets of its citizens.

In September, Masharov suggested Russia should create its own crypto bank, which, in his view, would solve many issues like illegal coin payments.

Until recently, financial authorities in Moscow were particularly reluctant to allow the free circulation of decentralized digital money in the country’s economy.

Earlier this year, crypto transactions were permitted within the framework of an “experimental legal regime” and later Russian officials signaled comprehensive regulations for crypto investment will be adopted in 2026.

However, using anything but the Russian ruble as a means of payment remains strictly prohibited. And foreign fiat operations were limited after Moscow’s involvement in Ukraine grew into a full-scale invasion in 2022.

Currency transactions outside of banks and savings institutions were illegal in the USSR. The Russian republic’s criminal code at the rime severely restricted the circulation of any foreign fiat among citizens, along with its exchange and use for payments.

Under an article treating the violation of currency transaction rules, such offenses were punishable by prison of up to 15 years or even the death penalty, at some point. The provision was repealed in 1994, well after the dissolution of the Soviet Union.

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