The Russian finance ministry has submitted a federal law draft aiming to make digital currencies legal in Russia for the first time. 

In the draft proposal submitted to the Russian government, the ministry is intending to regulate and seek clarity of cryptocurrencies, in addition to developing the on-going plans of introducing Russia’s first recognised digital currency; the digital ruble. 

The proposed law also highlights that digital currencies used for legal tender are illegal, rather it be used as an investment vehicle only. 

According to the ministry, a public feedback period was introduced regarding the bill that brought about two key notices. One being feedback from digital asset stakeholders and legal entities and the other being feedback on what existing financial and tech laws need amending to accommodate the bill. 

“The public discussion procedure takes place in several stages. We are currently at the initial stage of informing about the beginning of development,” stated a representative for the ministry. 

The bill also puts plans in motion for Russia’s Digital Ruble, which will be developed and regulated by the Bank of Russia. 

Despite being in its first phase of testing, the first prototype was completed last December and 12 Russian banks have already expressed interest in taking part in testing. 

According to the information on the Bank of Russia website, customers can access the digital ruble wallet through any financial institution with which they perform transactions.

Olga Skorobogatova, first deputy chairman of the Bank of Russia, commented on the digital ruble: “For businesses, this will reduce costs and create opportunities for the development of innovative products and services. The state will also receive a new tool for targeted payments and administration of budget payments.”

In ruling on the bill, all virtual asset service providers (VASPs), have to obtain a licence to serve Russian customers, subject to fulfilling a raft of requirements. These licences will apply to exchanges as well as over-the-counter platforms. 

For foreign exchanges, the bill requires them to register a legal entity in Russia before applying to be licensed to serve Russians.

Russia is seeking to tighten up Know Your Customer (KYC) checks, with the proposed bill requiring all traders to go through KYC checks before they are allowed to access the exchanges.