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Russian Authorities Plan to Monitor Crypto Wallet Transactions

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Russian Authorities Plan to Monitor Crypto Wallet Transactions

Bitcoin has long been hailed as a way to keep the authorities out of your business. But an announcement this week foreshadows the end of Bitcoin’s relative anonymity—at least in Russia. The Russian Financial Monitoring Service is implementing technology that would allow them to monitor cryptocurrency wallet transactions. Using cryptocurrency in Russia without the knowledge of government spies will soon be a lot harder.

Russia Will Monitor Crypto Wallet Transactions

Russia has a well-deserved reputation for surveillance that dates back to the early Soviet Union. Thanks to national investigative laws, the Russian government can legally listen in on all telephone and read all online conversations. Furthermore, this right isn’t restricted to a specific department: all government offices—customs, police, revenue services, the Kremlin and more—have had the right to intercept any communications since 1995.

So it may come as no surprise that Russia is exploring ways to monitor crypto wallet transactions. Specifically, the Russian Financial Monitoring Service purchased a software designed to uncover financial crimes and terrorism. In other words, it facilitates connecting someone to their crypto wallet, similar to how they can already link you to your bank account number.

This new software to monitor crypto wallet transactions comes from the Moscow Institute for Security and Information Analysis. It will be up and running by the end of 2018. This software will monitor crypto wallet transactions that involve Bitcoin first-and-foremost, though will undoubtedly expand its scope in the near future.

Russia Clamps Down On Cryptocurrency

Cryptocurrency in Russia is especially appealing and increasingly complicated. With cryptocurrency, you can initiate a transaction without a government or third-party, like a credit card company or a bank. For a country consistently described as a “surveillance state,” crypto’s lack of traceability is a nightmare.

During June 2018’s Direct Line with Vladimir Putin—an annual program during which Putin answers questions on live television—the president briefly addressed the topic of cryptocurrency. Though Putin did not fully condemn cryptocurrency, he didn’t encourage Russians to use it.

Putin admits that cryptocurrency’s advantage is that it “transcends national boundaries.” However, he stresses that cryptocurrency cannot be a currency. “The Bank of the Russian Federation considers that cryptocurrencies cannot be a means of payment” essentially because they are not backed by anything.

New Laws for Cryptocurrency in Russia

Russian Authorities Plan to Monitor Crypto Wallet Transactions

In addition to buying software to monitor cryptocurrency wallet transactions, Russia also approved new cryptocurrency regulations. These three bills—”On Digital Financial Assets,” “On Digital Rights” and “On Attracting Investments Using Investment Platforms”—make some subtle but important changes to the legality of cryptocurrency in Russia.

For starters, this legislation regulates how you can conduct cryptocurrency transactions. It also changes the way you can implement Smart Contracts. Additionally, it reclassified cryptocurrency as property rather than currency. Remember how Putin said that cryptocurrency wasn’t currency? That’s legally true, thanks to these laws.

Furthermore, launching an ICO now requires filing additional information with the government and miners have to pay taxes. The state also asserted that owning cryptocurrency is only protected by law when it has “economic value.” Not only is this vague, and leaves the government to decide what has ‘economic value’ on a case-by-case basis, but it disincentivizes the creation of new coins.

Most importantly, however, these three bills will make it a lot easier to create new laws on the issuance, exchange, and market of any future cryptocurrency. In other words, the non-specific nature of legislation will allow the government to justify any future interference with cryptocurrency in Russia.

Russia is Controlling and Monitoring Crypto

Russian Authorities Plan to Monitor Crypto Wallet Transactions

Crypto threatens authoritarian governments and credit card companies alike. From an American perspective, the Russian government’s plan to monitor crypto wallet transactions seems like an infringement on privacy. Yet financial services’ race to patent blockchain in the US comes from the same desire to control cryptocurrency. And now even al-Qaeda is jumping into crypto.

But underlying the seemingly democratic revolution that is cryptocurrency is blockchain. Distributed ledger technology is one of the best ways to store data, as demonstrated by cryptocurrency itself. This makes it appealing to almost every industry, and authoritarian governments.

Though Russia is fighting cryptocurrency, it’s only a matter of time before the Kremlin starts building smart cities with blockchain like those in China.