Anatoly Kozlachkov, the Vice President of the Association of Bank of Russia (ABR), announced this week that they were thinking about adding criminal liability for the use of non-custodial wallets for crypto storage. They were motivated by the challenges associated with seizures and foreclosures of crypto holdings of criminals and debtors. The Ministry of Internal Affairs in Russia offered its advisory assistance in developing the initial proposal of the ABR, which had been aimed at adding criminal liability for the use of such wallets to store undeclared crypto. Now, the association is more inclined toward the refusal of sharing wallet keys on the request of authorized bodies.
According to the ABR, this would not include the crypto assets that are stored in wallets found on crypto exchanges, as these are under the de facto control of these companies, much like how bank deposits work. However, all wallets that are under the control of the users would come under this category. This means that when a connection is discovered by relevant authorities between a crypto wallet and a debtor, they would have a choice; they can either disclose their keys, or be subjected to penalties for concealing their crypto assets. The bankers said that this would prevent the use of crypto for capital outflow.
Furthermore, it would also come in handy for ensuring that crypto circulation in Russia follows a closed circuit. The ABR stated that they would not be able to accomplish this if they don’t have an effective mechanism for foreclosure where non-custodial wallets are concerned. The regulatory concept had been sent by the ABR to the Central Bank of Russia back in mid-April. They had also sent it to the financial watchdog in Russia, Rosfinmonitoring, and the Ministry of Finance. The former stated that the proposal deserved attention and the latter was also willing to consider it. But, the CBR had not made any comment.
However, crypto industry representatives and lawmakers who are part of the expert council tasked with developing crypto regulations in the country have criticized the proposal. The deputy chairman of the parliamentary working group, Andrey Lugovoy, said that while he understood the concerns of the ABR, the regulation would become an obstacle in terms of crypto legalization. Other experts were also not very positive about it because they don’t believe non-custodial wallets can be identified easily, much less seized. Others believe that instead of criminal liability, administrative fines and tax penalties are enough to encourage crypto holders to be transparent.