The government admits "a complete ban on the segment of transactions related to its circulation was not possible" — making regulation the next best option.
Russia has unveiled plans to regulate cryptocurrencies — reducing the risk of an outright ban.
Officials have expressed concerns that the lack of regulation means law enforcement agencies "will not be able to respond effectively to offenses and crimes committed through their use" — resulting in the formation of a shadow economy and emboldening fraudsters.
The document adds that establishing rules would "minimize the threat to the stability of the financial system and reduce the use of cryptocurrency for illegal purposes" — with the government admitting that "a complete ban on the segment of transactions related to its circulation was not possible."
If approved, the proposed changes would result in the creation of a legal market for cryptocurrencies — provided that investors and operators follow clear rules.
Russia says it wants to compel crypto exchanges "to have financial safety cushions in terms of liquidity and capital adequacy, which in turn will safeguard the interests of citizens."
Overall, this could "take the industry out of the shadows and create the possibility of legal business activities," the document said.
Operators would be required to maintain a database to monitor suspicious and high-risk transactions from wallets related to illegal activities and financing terrorism — and perform thorough identity checks on all users.
The new proposals came days after India — another country that has been toying with an outright ban on cryptocurrencies — also announced that it plans to introduce regulation.
Although this tax rate is high, the news was welcomed by Indian exchanges.
Last week, WazirX CEO Nischal Shetty told the CoinMarketRecap podcast that he believes these measures make an outright ban far less likely. That's because it would make little sense for the government to introduce a tax regime for cryptocurrencies if they were going to be outlawed imminently.