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Russia Bans Bitcoin (techcrunch.com)
138 points by irunbackwards on Feb 7, 2014 | hide | past | web | favorite | 72 comments

What a ridiculous title and a story itself, absolutely ridiculous, where do they get the information from to post such bold titles. Bitcoin is NOT banned in Russia, there is a warning to russians posted by central bank of Russia [1], warning is to notify people about dangers of using bitcoins, that's it! There is NO law that bans bitcoins in Russia, people are free to use if they want to, goverment is just warning you that it might be dangerouse.

Like smoking cigarettes, there is no law that bans you from smoking, but the health organizations are warning you that it can be dangerous for your health.

I am sick of this sort of stories which make to top of hacker news like the recent one by NBC about being "hacked" in Sochi [2] which was pathetically demolished by HN community [3]

[1]: http://www.consultant.ru/document/cons_doc_LAW_158121/

[2]: http://www.youtube.com/watch?v=waEeJJVZ5P8

[3]: http://blog.erratasec.com/2014/02/that-nbc-story-100-fraudul...

" В соответствии со ст. 27 Федерального закона «О Центральном банке Российской Федерации» «официальной денежной единицей (валютой) Российской Федерации является рубль. Введение на территории России других денежных единиц и выпуск денежных суррогатов запрещается». Получившие определенное распространение анонимные платежные системы и криптовалюты, в том числе наиболее известная из них – Биткойн, являются денежными суррогатами и не могут быть использованы гражданами и юридическими лицами. "


"According to the title 27 of the Federal Law "On Central Bank of Russian Federation" "the official currency of Russian Federation is rouble. Issue (introduction) of other currencies and currency surrogates on the territory of Russia is prohibited". Anonymous payment systems and cryptocurrencies, including the most popular - Bitcoin, are currency surrogates and can't be used by physical persons and corporations. "

This determination - bitcoin as a currency surrogate - was made by the "expert group" consisting of high level bureaucrats from the enforcement side, ie. Central Bank, FSB, police (police in Russia is one big vertically integrated structure from local to federal level), Attorney General office.

> "the official currency of Russian Federation is rouble, Issue (introduction) of other currencies and currency surrogates is prohibited

How is that different from any other country? Its a generic law that every other country has, you can't start spreading a new currency in United States as well because "official currency of United States is US Dollar".

We all know what happened to a "Liberty Dollar" in United States [1]:

In 2006 the U.S. Mint issued a press release stating that prosecutors at the Justice Department had determined that using Liberty Dollars as circulating money is a federal crime. The press release also stated that the "Liberty Dollars" are meant to compete with the circulating coinage (currency) of the United States and such competition consequently is a criminal act.[2]

[1]: http://en.wikipedia.org/wiki/Liberty_Dollar#Federal_Governme...

[2]: http://www.usmint.gov/pressroom/index.cfm?flash=yes&action=p...

You're ignoring the relevant part that is quite different from how most countries have thus far ruled on bitcoin-

"Anonymous payment systems and cryptocurrencies, including the most popular - Bitcoin, are currency surrogates and can't be used by physical persons and corporations."

All your Bitcoins are's belongs to us !

I thought you could spread a new currency in the US, but no one has to accept anything other than the official US currency. Which was the reason why things like tokens and bitcoins can exist.

You cannot make your currency resemble official US currency in any way that would confuse a normal citizen. This has been interpreted rather broadly. The Secret Service has shut down a number of private currencies due to this rule, including silver/gold backed paper money and coins, Liberty Dollar, eGold, etc. I think they shut down the guy that was putting a bitcoin sticker on gold coins as well.

The reason they have not shut down Bitcoin is that they do not consider it a currency. It isn't money, it is a commodity at best.

That would be a more reasonable law, but that is not the law.

Except it is the law. Liberty dollars were intentionally similar in design with US currency— any random joe would confuse them. Literature from their maker encouraged (with indirect language) people to pass them off as US dollars and they were priced to make it profitable to do so (E.g. $8 in melt value silver, sold to you for $15 with a "$20" stamped on the front). (See: http://truthalliance.net/Portals/0/Archive/images/news/2012/... plus there are a whole _additional_ set of laws covering the minting of coins of precious metal in the US which aren't relevant for Bitcoin discussions).

The counterfeiting charges in the Liberty dollar case basically went uncontested.

See also: https://en.wikipedia.org/wiki/List_of_community_currencies_i...

To do otherwise rapidly runs into a mess of regulating every single private interaction people have.

That's not my understanding of the law or that case, as summarized in the Wikipedia article: http://en.wikipedia.org/wiki/Liberty_Dollar#Federal_Governme.... The relevant section of US code says

> Whoever, except as authorized by law, makes or utters or passes, or attempts to utter or pass, any coins of gold or silver or other metal, or alloys of metals, intended for use as current money, whether in the resemblance of coins of the United States or of foreign countries, or of original design, shall be fined under this title or imprisoned not more than five years, or both.

The creator of the currency was convincted for violating this section of code, among others. This is completely separate from imitating US dollars or counterfeiting. I can find no indication that imitation of official US currency was the primary or only justification for his conviction. Every source I can find indicates that simply competing with official US currency is a crime.

> any coins of gold or silver or other metal, or alloys of metals,

And you think this is applicable to Bitcoin because?

In any case, I was going to chide you to read the ruling, but it seems to have vanished offline. It was previously online. Fascinating stuff.

Here were the actual charges (from the BVNH wikipedia article):

Von NotHaus was charged under counterfeiting laws with one count of conspiracy to possess and sell coins in resemblance and similitude of coins of a denomination higher than five cents, and silver coins in resemblance of genuine coins of the United States in denominations of five dollars and greater, in violation of 18 U.S.C. § 485, 18 U.S.C. § 486, and 18 U.S.C. § 371; one count of mail fraud in violation of 18 U.S.C. § 1341 and 18 U.S.C. § 2; one count of selling, and possessing with intent to defraud, coins of resemblance and similitude of United States coins in denominations of five cents and higher, in violation of 18 U.S.C. § 485 and 18 U.S.C. § 2; and one count of uttering, passing, and attempting to utter and pass, silver coins in resemblance of genuine U.S. coins in denominations of five dollars or greater, in violation of 18 U.S.C. § 486 and 18 U.S.C. § 2.

You need to be somewhat careful with non-court sources on this, people on NotHaus' side have been making a strenuous effort to cast this as persecution of alternative currencies, and they've had some help from some inept law enforcement people who— as usual— don't understand the law. If you go and actually read the indictment and conviction you'll see that it wasn't really at all.

I never said anything about Bitcoin. I responded to the comment which said "I thought you could spread a new currency in the US, but no one has to accept anything other than the official US currency."

And yes, I read about his convictions. 18 U.S.C. § 486 is the section I pasted in my previous comment.

the difference is that Eric Holder hasn't yet made a determination that Bitcoin is a currency and thus violates the law (like they did to Liberty Dollar, etc...)

How do other foreign currencies compare to bitcoin with respect to this paragraph? Surely that doesn't mean it's correspondingly illegal to trade RUB for USD within russia, but i'm not sure what the salient difference is

>Surely that doesn't mean it's correspondingly illegal to trade RUB for USD within russia, but i'm not sure what the salient difference is

If i remember correctly the other party must be a bank.

hm. the common understanding (from Russians) in Bitcoin IRC back in 2011 was that all transactions for foreign currency _and_, insane enough, all _barter_ was technically illegal in Russia, and so Bitcoin probably was too... but at the same time no one cares about those laws so it was irrelevant.

From BTCE (google-translated from Russian)

Dear participants of the project BTC-e.com! In connection with decision-making in relation to the crypto-currency in Russia working with Qiwi suspended indefinitely, as well as with other payment systems in Russia. All financial obligations will be met in full without the means available additional commissions. encourage you to use the system okpay (USD, EUR), interest on the conclusion on it is reduced to zero. apologize for any inconvenience. Sincerely support btc-e.com

The source appears to be the Russian Government[1]

[1]: http://genproc.gov.ru/smi/news/genproc/news-86432/

This is not a ban exactly in a sense that there is no law baning bitcoin, but by results of this meeting they (Prosecutors office mostly) decided that some existing law could be used against not clear who. The whole situation is not clear either.

IANAL, but this official news states clearly that bitcoin is illegal in Russia. Really, it doesn't get more clear than a Prosecutor citing a law and exemplifying bitcoin as being illegal.

You don't need a new law to ban something. All you need is one stupid official to apply an old law to a new concept.

Based on the old law, one cannot mine, trade, accept, and even use bitcoin to buy stuff in Russia.

It is 'illegal' in the same way all foreign currency (more accurately, anything that isn't the ruble) is illegal - that is, you need specific permission to trade, hold or settle in any other currency.

In Russia currency is extremely regulated - you won't find rubles outside of Russia and within Russia what you can do with other currencies is extremely limited (and requires permission/licensing). They did this to stop locals fleeing the ruble and causing a crash. At one point 90%+ of all cash transactions in Russia were in foreign currency - so these laws stem from that period.

The best way to interpret this guidance would be as a reminder from the Russian government that bitcoin is not a replacement nor alternate currency for the ruble, and the same laws apply to it as apply to the USD and other foreign currencies.

This is far from a 'ban' on bitcoin, you can still hold bitcoin in the same way you can hold USD or any other foreign currency. You just can't settle domestic transactions in bitcoin.

>You don't need a new law to ban something. All you need is one stupid official to apply an old law to a new concept.

Or a SMART official. I, for one, am all for banning bitcoin.

Yep, not yet. But I'd like to see how they will be banning PGP.

Well, IMNAL, but laws seem to imply that developing, supporting and distributing cryptographic solutions without appropriate FSB-provided license is banned, although I never heard anyone had issues with hosting, say, Debian mirror with GnuPG and OpenSSL, or adding TLS support to some product. But it may be well possible that laws are there but it's just that no one cares to enforce them.

On the other hand, use is legal, except if user is state-owned and municipal corporations. Those must use only FSB-licensed solutions.

> although I never heard anyone had issues with hosting, say, Debian mirror with GnuPG and OpenSSL, or adding TLS support to some product

From the Debian package description for openssh-client, at http://packages.debian.org/sid/openssh-client :

"In some countries it may be illegal to use any encryption at all without a special permit."

That warning was added to the description for a reason.

As for hosting, there was a huge issue originally with the export of cryptographic software, which led to the creation of Debian's "non-us" archive of software that had to be hosted outside the US. That got solved once it was possible to distribute such software with a notification requirement. See https://lists.debian.org/debian-devel-announce/2002/03/msg00... for the long and storied history.

I hope they won't but why would they want to ban PGP in first place?

Why would the Russian government want to ban encryption they can't break? Can't imagine.

More seriously, I assume there's a longstanding suspicion that any Western encryption technology has been engineered to be vulnerable, which isn't totally paranoid.

"It's still the same warning. no more, no less" https://bitcointalk.org/index.php?topic=452894.msg4990618#ms...

It's my understanding that this isn't about Bitcoin per say but a general law that makes it illegal to transact in any foreign currency unless you are a bank licensed for Forex. USD and EUR and similarly not allowed.

That is exactly it. Because of the instability in the economy during the 90s where most Russians abandoned the ruble and used USD the Russians heavily regulated all non-ruble currencies as a way to force stability.

This notice is more a reminder that bitcoin is treated as other non-ruble currencies are. I'd assume most of the Russian based markets already knew that.

The laws are there but they are extremely difficult to police, while you can't just open a bank account and accept USD (which you need a license for) there is still a large grey economy.

Russia is a joke of a country. Their dictator just spent $51 billion looted from the people on a failed winter Olympics.

Every country is a joke of a country, in case you haven't noticed. The ruling class everywhere lives large on money looted from the general populace.

To vastly differing degrees.

The US from 1776 to about 1880 > the US of today > Russia of today > Soviet Union > North Korea.

What I said applies to every single country in the history of the world. Is your point that light looting is better than extreme looting + torture camps? Sure, but it's still looting.

Well said. For most problems in the world, people are quick to point to a certain country, race ethnicity, religion, etc. as the most glaring example or source, when in fact people are the problems. No part of humanity can boast the largest amount of any vice or virtue. As a species, we're just faulty.

This is a false generalization.

Do they have a new source for this? It reads remarkably like the single story posted yesterday which someone suggested could be the result of speculators spreading misinformation through hackery or otherwise.

There was a regulatory meeting Thursday in Russia, this appears to be the result.

Conflicting information on whether individuals can still trade in bitcoin legally. If so, this would leave Russia in pretty much the same boat as China.

Coming from Russia, and skimming through related news today, I get an impression, nothing is banned (by any means).

What they might do at some point, is prohibit selling goods for bc, this is possible.

Mining / exchanging and buying outside of the country, or buying virtual goods will not go anywhere for sure :)

Again, another Orwellian-themed fake news about my place (or am I getting paranoid?)

UPD: just read the article at http://genproc.gov.ru/smi/news/genproc/news-86432/ -- yep, no new laws, nothing -- "measures will be taken to prevent fraud, etc."

The overall impression is, they are going (a some point, not now) to explicitly delegitimize cryptocurrencies as a means to make payments officialy, but not ban / outlaw using the mining tools, or exchanging the bitcoins.

I'm from Russia too, and my understanding that the situation is not that bright: they clearly declare that <<bitcoin is "money surrogate" and cannot be used>>(used as money?).

What they _might_ do at some point is in fact allow trading bitcoin itself just like China. They declare that they are concerned "protecting interests of users of cryptocurrencies", so there is hope.

this smells of old days when ruble collapsed and people started using dollar as a shadow agreed upon currency.

We'll see, so far this has resulted in bc <-> Russial PayPal clones / alternative operations being (willingly, I'm sure) blocked by that exchange site from the top comment.

You make a lot of posts defending the Russian government.

Why, should he be making the opposite? It's a government, people, lots of people, have voted FOR it, and support its actions.

Lots of Americans in HN make lots of comments defending the US government and the US point of view. Actually the American point of the view (not just in politics: in life, about startups, society, etc) is the constant undertone on everything written here.

Just because to somebody, as an American, when he champions such things it feels to him like he is stating the "natural law" (instead of man made ethics and opinions) doesn't change that fact.

Yeah, I am getting close to counter-balancing the CNN :)

Blue Horseshoe LOVES Anicott Steel......

Could someone please ELI5 if I was a very wealthy Russian criminal involved, say, in counterfeit, drugs, human trafficking and/or technological scams, how exactly can bitcoin help me "launder" my wealth?

Actually it's very easy. And interesting thought experiment. Biggest advantage of Bitcoin is to be able to transfer money outside the current banking system. Have you noticed the news how major banks are to screen customers etc. Pretty obvious that state agencies can easily notice any large transfer and investigate it further. With Bitcoin it's impossible. Let's go step by step

1. I have some cash which I want to stash away from government.

2. My options are a) Buy property (India's property boom) b) Buy gold c) Store the cash somewhere (say inside mattress)


a) I can be identified or property can be lost. As can't buy it on my name

b) Can't easily transfer internationally. Theft fears etc.

c) Inflation, fire, water

With Bitcoin. I buy Bitcoins in cash (localbitcoins). Or use third party accounts (same used for buying gold or property).

1. I have full access to the money

2. Can take it anywhere and convert it to local currency

Only downside would be if Bitcoin crashes i.e. loses all value or a lot of value within short span. But if more and more businesses start using it. Virgin, Overstock etc. then chances of that happening would get lesser and lesser.

I don't agree with what you've said about being able to buy Bitcoins if you had a significant sum of money.

I define significant here as $50,000 or more.

It is not easy to buy BTC in cash through LocalBitcoins. I know first hand how intimidating the process is (even after the 10th time) because you don't know who you're meeting and what their intentions are. Secondly, there aren't a lot of people willing to transact $50,000+ in BTC. This is usually a supply problem as these people don't have hundreds of BTC to sell.

Using third party accounts is also silly as that leaves a paper trail. If any of your cash goes through someone else's hands, it is most likely recorded.

To take this further with your 'solution', you can't simply convert this significant sum of money into local currency easily. There is still going to be a paper trail of you converting the money from BTC and if you have done any selling on exchanges, you'll know you need your identity verified.

If I were someone shady, I would NOT turn to BTC to launder my money, it doesn't make a lot of sense.

People often confuse cryptocurrencies and BTC in general with being totally anonymous. They're not.

Some reasons why that might not be so easy: http://www.coindesk.com/localbitcoins-users-criminal-charges...

So the best thing anyone could do is to buy some BTC from time to time to make a stash, to have real money when fiat money goes down :)

Ok, I think I get it. So bitcoin is basically an alternative investment that is more liquid than, say, art.

I guess a follow up question, then. Internet geeks seem to really be pro- bitcoin. Do you think money laundering is not a big deal compared to the benefits of bitcoin? Do you think there is anything that should be done to try to fight it?

I give you an alternative view instead of answer to your question. Most of the black money exists because of money's fiat nature. Money is printed in large quantities. Counterfeits are added to the circulation. Banker/Politician/Bureaucracy nexus often takes cuts from the supply.

I think Bitcoin can fix this. Money with every transaction identifiable. Which can't be counterfeited. Can't be created out of thin air.

From where I see, it solves more problems (or other problems).

If some criminal elements run away with the money. Solution will be to dedicate huge amount of resources to find them and recover the money. Instead of creating new money, which is like tax on everyone else holding it.

Drug dealers have tons of cash they can't put in a bank, per government regulations on disclosure. People with tons of bitcoins may want to cash out a part of their nest egg.

They get together and trade cash for BTC. Now the dealers can go on any exchange, and convert the BTC back to digital currency, then can transfer into their bank.

then can transfer into their bank.

I agree with you until this point. Banks will still be able to apply the same safeguards they use when customers deposit large amounts of cash (reporting large transactions, "suspicious" activity, etc)

Same goes with certain type of merchants such as precious metal dealers.

I don't know if other merchants that deal with large transactions need to report large cash transactions (casinos, car dealerships, etc?)

Bitcoin is really no different than cash in this respect, except it's easier to move but actually more traceable since the blockchain is entirely public.

That doesn't make sense to me. You're saying the banks won't let the criminal put their cash in the bank, but if the criminal converts the cash to bitcoins and back to real money they somehow will?

Either way I don't think places like Dubai or Switzerland have any problem with Russian drug money.

Physical cash to local bitcoins (placement); send bitcoins abroad and/or invest them in a bitcoin related busines (layering, integration), report bitcoin profits in that jurisdiction and bring them into banking system (integration).

It's easier to drip out as you need it, which is less suspicious

Or exchange for goods outside the traditional financial system.

I would think with Russia and China banning BitCoin, it would make the currency more valuable. This seems counter intuitive to how the BTC market responding by crashing after the Chinese announcement.

Does BTC follow the same economic principles as standard currency. Such as your basic supply/demand, when supply goes down, demand goes up and price goes up. Or is it immune to such things?

Just curious. . .

I think it is performing as you would expect. When China/Russia bans Bitcoin, it reduces the demand as law abiding citizens stop using it. Reduced demand leads to reduced prices.

> Reduced demand leads to reduced prices.

This is probably true in this case. In the case of physical goods it is not always true. If there is continued demand but less of it, prices can rise for some goods because the fixed costs of manufacturing increase on a per item basis as you can't buy materials in as much volume. Increased costs of manufacturing an item will lead to higher prices for the consumer.

Thus reduced demand does not always lead to reduced prices.

True. This is economics, there are no hard and fast rules. In fact, I would say that the moment a hard and fast rule is discovered, is the exact moment that it becomes invalid.

However, even in your example, the higher prices will only come in time. This is assuming we are talking about a commodity good that is traded on an open market.

The immediate effect of a sudden reduction in demand is an increase in inventories on the sell side. If there is no expectation of resumption of demand, the inventory holders are likely to panic and sell at a reduced price to cut inventories. This is a classic case of "first out the door wins" and is what crashes are made of. They will also cut manufacturing (or mining or farming), but the affect of this on the price will only manifest once the reduction in production makes it through the supply chain. For something like corn, this could take upwards of a year.

Obviously, all this is affected by a large number of variables: warehousing costs, profit margins, manufacturing complexity and lead time, pricing power, tooling costs and other capital expenditures, etc.

"you can’t prevent Russians from using Bitcoin"

Haha, tell that to the guys with the jackboots and machine guns.

Well, point taken, but when it comes to doing things under the radar on the web, you must admit, Russians are just really good. For a certain slice of the online population, such laws won't change much.

Well, I understand why the Russian government is doing this. I don't have much confidence in the Ruble and am pretty sure I am not the only one. So BTC might be a viable alternative. An alternative that the Russian government has no control over.

Just curious if there are any countries that are very pro bitcoin?

Probably not... I don't think it's in any country's interest for now.

But here's an interesting story I just found: http://www.policeone.com/police-administration/articles/6643...

We should note the timing when the world is distracted by the olympic games starting ceremony.

Obligatory: In Soviet Russia, Bitcoin bans Russia.

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