Russian Criminal Code to Be Updated with Crypto-Related Provisions

• Russia wants to expand its criminal code with terms related to cryptocurrencies so that law enforcement agencies can confiscate crypto during criminal probes.
• A new bill will state that crypto is a confiscatable asset and will outline the procedures for seizures.

Russian legislators are now planning to create new definitions within the criminal code concerning cryptocurrencies and other related tools. The government believes that this change will facilitate the police’s ability to confiscate property containing prohibited content during an investigation.

The Russian Government Commission on Legislative Activity has endorsed a bill from the Ministry of Justice defining the terms ‘crypto’ in the Criminal Code and the Criminal Procedure Code, as cited by Vedomosti. 

However, at the present time, no such definitions are provided in the Russian legislation, which hinders the investigation of related cases. The government is expected to send this draft bill to the State Duma soon for legislative review soon.

The authorities have expressed a number of concerns about the fact that it is often unclear how police forces should deal with crypto-related crimes. According to public prosecutors, since digital currencies do not have a legal definition, it is hard to explain ownership, storage, or following legal injunctions involving crypto wallets.

The current legislation allows the Russian courts to recognize cryptocurrencies as intangible items only under specific circumstances, such as bankruptcy and counter-terrorism. He noted that more comprehensive criminal investigations remain without clear guidelines for their identification or treatment.

Vladimir Gruzdev, the Chairman of the Association of Lawyers of Russia, claimed that in most cases, law enforcement agencies turn to private experts in order to deal with cryptocurrencies. Cold storage wallets can be physically seized while moving funds from online or ‘hot’ wallets, which are done through safe methods that are not covered in the current laws. The new draft law provides a legal framework for dismissing and confiscating crypto assets and defining asset handling and management. 

Legal Community Highlights Gaps and Risks

While some legal professionals praised the idea as overdue, done. However, there are issues with regard to the technical feasibility of the acquisition by the police forces without violating the rights of third parties.

Maria Bakakina, an adviser at Sokolov Trusov and Partners, asked how the court could confiscate crypto assets in previous cases without applying the law. She pointed to an incident that occurred in 2022 when 24 ETH wallets were confiscated in St. Petersburg, turning a blind eye to due process.

“The question immediately arises: What legal mechanism have courts previously used to seize cryptocurrency?” Bakakina noted.

However, enforcement bodies are already adjusting to the new situation. In early April, Federal Bailiff Service head Dmitry Aristov acclaimed that new approaches are currently being designed to swap seized BTC into fiat for the state treasury.

Push for State-Controlled Stablecoin Gathers Pace

In parallel, Russian officials are actively working to decrease the reliance on Western-controlled digital assets. The Russian Ministry of Finance is looking at the potential of establishing a stablecoin of Russia linked to foreign currencies.

This urgency comes in the wake of the freeze of $30 million worth of Tether’s USDT connected to the recently sanctioned Russian crypto exchange Garantex. That disrupted its operations and highlighted the challenges of using other stablecoins regulated by foreign entities.

During the latter, Osman Kabaloev, the deputy head of the Finance Ministry’s financial policy department, suggested that the government would need to issue a stablecoin to campaign for its citizens. He revealed that Russia has to have digital tools that cannot be shut down by other people.