Russia Seeks Jail, Fines for Unregistered Crypto Services

Russia’s government submitted a draft law to the State Duma on Friday that would criminalize offering crypto services without registration with the Bank of Russia. The proposal would amend the penal code to make unlicensed activity in the organization of digital currency circulation an offense.

Under the bill, individuals operating without central bank registration could face fines of about $4,000 and up to four years in prison. Penalties are steeper for organized groups or cases involving large-scale damage or income extraction: compulsory labor for up to five years or imprisonment for up to seven years. The draft also allows noncustodial financial penalties of up to 1 million rubles or an amount equal to the convicted person’s salary or other income for a period of up to five years.

The authors of the bill wrote the measure is intended to regulate service providers that facilitate the circulation and exchange of digital assets by tying legal operation to Bank of Russia registration or licensing. The draft follows an earlier set of bills introduced in March that included criminal penalties for illegal cryptocurrency mining.

Russia’s Supreme Court described the bill as lacking “reasoned justification” for criminal penalties and called the proposal “premature” until the country’s Digital Currency and Digital Rights law takes effect in July.

If the bill is approved, registration with the Bank of Russia would become a legal requirement for domestic crypto service providers.

In a related development, Grinex, a Russia-based crypto exchange, halted trading after reporting a hack that led to a loss of more than 1 billion rubles (about $13.7 million). The company filed a criminal complaint and provided information to law enforcement.