The Central Bank of Russia (CBR) is searching for ways to incorporate blockchain technology and digital assets into its domestic financial system amid a wave of new economic sanctions. On November 7, the CBR published a report for public comment titled ‘Digital Assets in Russian Federation’.
It assesses whether the sanctioned state may grant access to its domestic market to foreign digital asset issuers, particularly those from "friendly nations."
The report also includes the following:
1) Recommendations for reforms in accounting and taxation.
2) Safeguards for small investors.
3) Regulation of digital assets.
4) Digital property rights linked to tokenisation and smart contracts.
The CBR stated that it fully supports the "further development of digital technologies," provided that they do not put users at risk for unmanageable risks to their money or cybersecurity.
Although blockchain technology is still in its infancy, CBR believes that the regulatory norms that apply to the issuance and circulation of traditional financial instruments should also apply to digital assets.
According to the CBR, short-term regulation should focus on preserving investor rights, refining the specifications for distributing digital assets, ensuring the issuer is accredited, and guaranteeing the issuer gives investors all necessary information.
The Central Bank indicated in a Telegram message that although a legal framework for digital assets has been developed, stronger regulation is still required for the industry's future development. The message read, "Russia has created the necessary legal framework for the issuance and circulation of digital assets. But so far, the market is at the initial stage of its development and is many times inferior to the market of traditional financial instruments. Its further development requires improved regulation."
The central bank acknowledged a legislative framework for smart contracts already existed. Still, it recommends that any intelligent warranties created in Russia be submitted to an independent audit before deployment.
CBR was similarly upbeat about the potential of tokenised off-chain assets. The bank asserted that legislation would require establishing a "legal connection" between the token owner and the token itself.
The announcement comes after the Russian Ministry of Finance on September 22 approved Russian individuals' use of crypto assets for cross-border payments.
However, neither the 33-page CBR research nor the ongoing conflict between Russia and Ukraine—which is raging in Ukraine—mentioned the tightening of sanctions against Russia or the adverse effects these measures have had on its economy.
However, it mentions another document it works on that focuses on the digital ruble, intended to be tested as early as 2023 and is the next central bank digital currency for Russia (CBDC).
All Russian-based banks would receive the digital ruble in 2024, the CBR announced in August 2022.
The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash