Crypto news

The State Duma Committee on the Financial Market has substantially revised the draft law "On Digital Currency and Digital Rights" for its second reading. The key innovation is a mechanism for blocking transfers that banks suspect are linked to the illegal circulation of cryptocurrencies. This is a serious step towards tightening control and fundamentally changes the logic of regulation.

The initial version of the document was more straightforward: it provided for two registries maintained by an authorized body. The first would include legal entities, individual entrepreneurs, and foreigners organizing cryptocurrency circulation outside the legal framework. The second would include foreign payment providers servicing transfers in favor of those listed in the first registry (foreign banks were excluded from this list).

Both registries disappeared by the second reading. Instead, a fundamentally new concept is introduced — the "unauthorized recipient." This is a recipient of funds regarding which a bank has suspicions that they are engaged in the circulation of digital currencies without the status of a legal market participant in Russia.

An important nuance: the draft law does not define the criteria for such suspicions and does not task the Bank of Russia with developing them. Each financial institution will establish them independently, recording them in internal documents. This creates grounds for subjective decisions and potential abuses.

Banks will be required to transmit information about "unauthorized recipients" to the Central Bank. In response, the regulator will only be able to provide data on foreign payment service providers servicing transfers in their favor. The law does not require this information to be published, which adds opacity to the process.

Who will refuse transfers

Payment agents, telecom operators, postal operators, and participants of the digital ruble platform were excluded from the blocking mechanism by the second reading. The obligation to refuse transfers now rests solely on credit institutions, branches of foreign banks, and payment card issuers.

The bank is obliged to immediately notify the client of the refusal in the manner prescribed in the contract. However, the document lacks procedures for notifying the "unauthorized recipient" themselves and a mechanism for contesting the blocking. This is a serious gap that could lead to arbitrary restrictions.

The bank is not obliged to refuse a transfer in three cases:

• the transaction is related to a foreign trade contract;
• the transfer is made on behalf of an organization exchanging digital currency;
• the transaction is on behalf of a broker or trustee, if permitted by the Bank of Russia.

The State Duma plans to consider the draft law in its second reading on July 21. Earlier, First Deputy Chairman of the Central Bank Vladimir Chistyukhin set the date for the law to come into force as September 1.

My analysis: The new blocking mechanism is essentially a transfer of authority to identify "illegal" crypto operations to banks. The lack of clear suspicion criteria and a contestation procedure creates a risk of excessive blocking and pressure on bona fide market participants. This could lead to an even greater outflow of crypto assets into the shadow sector or abroad, which is directly contrary to the stated goals of legalization.