Russia creates system that allows the government to monitor crypto transactions

  • Russia’s financial monitoring service is set to unveil a system that will monitor crypto transactions.
  • It will also be used by the government monitoring service Rosfinmonitoring to monitor the crypto chains and analyze behavior.

Concerns raised against the use of cryptos are mainly focused on tax evasion, terrorist financing, and money laundering. As countries take a more radical approach through the creation of a hostile environment to discourage their use. Russia has devised an approach to perfectly control the use of the asset class rather than imposing a complete ban. 

According to a report, Russia’s financial monitoring service has unveiled a system that will monitor crypto transactions. Once this is implemented, the country will be able to identify potential users and analyze the market behavior. 

To be able to get access to in-depth crypto information, the system has been designed to track transactions and provide data on the value of a cryptocurrency transaction and wallet balance. It will also be used by the government’s monitoring service Rosfinmonitoring to monitor the crypto chains and analyze behavior. This will effectively assist their operations by creating a database of cryptocurrency wallets associated with terrorist financing and other illegal activities. 

Russia seeks to remove anonymity

The tracking service will be created by a subsidiary of the largest banking and financial services company in the country, Sberbank. In 2020, Russian President Vladimir Putin signed a law permitting Russians to buy and sell digital currencies. By digital currencies, the law stressed that:  

They are recognized as an aggregate of electronic data capable of being accepted as the payment means, not being the monetary unit of the Russian Federation or a foreign state, and as investments. TDigitalcurrency cannot be used at the same time to pay for any goods and services.

However, the growth of crypto popularity has forced authorities to come out with a system to track transactions and de-anonymize users. This is what the proposed Rosfinmonitoring system seeks to achieve according to Moscow Digital School expert Yefim Kazantsev. 

Rosfinmonitoring was first sought after a tracking tool in 2018, then later reinstated its plan in 2020. This was to uncover the likes of contract killing, drug trafficking, tax evasion, cybercrime, financing of extremism, and sales of information from closed databases. 

The project seeks to partially remove the anonymity of participants in transactions with cryptocurrencies in Bitcoin, Ethereum, Omni, Dash, and Monero systems.

Many countries have responded to these problems by imposing strict regulations on exchanges like Binance to protect consumers. Binance has recently urged users to complete their Know-Your-Customer (KYC) verification amid pressure from international regulators. Also, the exchange has integrated a tax reporting tool to enable users to keep track of their crypto activities. 

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