Bitcoin Deemed Illegal Currency In Russia
February 10, 2014

Russia Rules That Use Of The Bitcoin Is Illegal

redOrbit Staff & Wire Reports - Your Universe Online

Dubbing it a “money substitute” and not a valid currency, Russian officials have declared that the bitcoin violates a 2002 edict prohibiting the use of cryptocurrencies within the nation’s borders, Fox News and other media outlets reported over the weekend.

According to reporter Maxim Lott, the Russian Prosecutor General’s Office released a statement on February 6 stating that the digital currency “cannot be used by citizens and legal entities,” as it violates an existing law banning the use of monetary units other than the country’s official currency, the ruble.

Likewise, on January 27, the Central Bank of Russia issued a warning that bitcoin trade was speculative in nature and a tremendous investment risk, Reuters reported Sunday. It also cautioned that citizens risked “being drawn… into illegal activity, including laundering of money obtained through crime, as well as financing terrorism,” by using the digital currency.

“The Prosecutor's General Office said it was working with the central bank and other law enforcement agencies to tighten regulations and prevent legal offences committed with the use of pseudo-currencies,” the news agency added. However, as TechCrunch’s Romain Dillet points out, the government’s declaration does not necessarily mean that they will be able to prevent the bitcoin’s use.

Since the digital currency is not reliant upon a physical institution (relying instead on a global network of miners), it is nigh impossible to prevent Russian citizens from using bitcoins, Dillet explained. However, Russian companies working in the bitcoin industry will likely fall under increasing governmental scrutiny, he added, and being caught in possession of a digital wallet is technically a violation of federal law there.

“While harsh, this decision shouldn’t come as a surprise. Bitcoin was designed to be unregulated. But over time, many countries and official institutions have decided to try and regulate it,” the TechCrunch reporter added. “For example, in August, a federal judge in Texas has declared that Bitcoin is a currency and should be regulated just like euros or US dollars,” suggesting that it “won’t be able to remain an unregulated currency for long.”

In related news, David Nield of Digital Trends said that the Mt. Gox exchange in Japan was forced to shut down this weekend due to issues related to customer payments. In a statement, the exchange said that all withdrawal requests would be halted, and the funds returned to the customer’s wallets. An update on the issue was expected sometime Monday.