The Russian government and the country’s central bank, Bank of Russia, appear to have reached an agreement on how to regulate Bitcoin and other cryptocurrencies in a plan to recognise crypto as a form of currency but not what the country considers to be digital financial assets (DFA). The agreement marks a significant U-turn after the Bank of Russia only last month proposed banning miners and several other crypto operations over concerns that they could endanger the country’s financial system.

Russian newspaper Kommersant reported that the government and the Bank of Russia have reached an agreement on how to regulate cryptocurrencies. Authorities are now preparing a draft law, expected by February 18, which will define crypto as an “analogue of currencies” rather than as DFA.

The report further stated that it will only be possible to use crypto “in the legal sector” with full identification, through the banking system or via licensed intermediaries.

The news comes just weeks after the Bank of Russia pushed for a blanket ban on crypto in a report issued in January, arguing that the speculative nature of the industry posed a significant threat to the financial stability of citizens. As part of that proposal, the central bank also said that financial institutions should be stopped from facilitating crypto transactions.

Further details from the Kommersant report suggest that crypto transactions of over RUB 600,000 (roughly Rs. 6 lakh) will have to be declared or will constitute a criminal offence. Fines will also be levied on those who illegally accept crypto as a means of payment.

An accompanying draft document, linked in the report, also claims the regulation would ensure the protection of citizens’ rights under a licensing regime aimed at cryptocurrency providers. Providers will need to have “financial airbags” in terms of liquidity and adequate capital.

“The complete absence of regulation of this industry, as well as the establishment of a ban, will lead to an increase in the share of the shadow economy, an increase in fraud cases and destabilization of the industry as a whole,” the document reads.

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