An amendment to the Russian criminal code can be used against crypto traders, according to a legal firm providing advice to those involved in the digital asset space.
On the surface, Russia wants to punish “money mules” laundering cash for criminals. Experts warn, however, that the updated law would allow Russian authorities to target ordinary citizens trading digital currencies.
Russian government seeks harsher penalties for ‘droppers’
The executive power in Moscow has submitted new legislation amending the country’s main criminal law to toughen penalties for “droppers,” Russian slang for people who lend their bank accounts and wallets to fraudsters trying to launder criminal proceeds.
The respective bill was filed with the State Duma, the lower house of the Russian parliament, on Friday, the leading Russian-language crypto news outlet Forklog reported on the weekend. It amends Article 187, “Illegal circulation of payment instruments,” of the Criminal Code of the Russian Federation.
The new text expands criminal liability for the front persons transferring illegally obtained funds on behalf of actual perpetrators of thefts and other crimes. It describes the conditions under which they can be prosecuted for sharing electronic payment instruments, such as bank cards, with criminals.
People in financial difficulties and debt, immigrants, and poor students often fill the role of a “money mule.” They are usually entangled in criminal schemes through job ads offering exaggerated earnings for a few hours a day of work, with money transfers.
The Russian crypto community is likely to soon learn that “droppers” may not be the only category affected by the upcoming legislative change. According to Ignat Likhunov, founder of the crypto-focused legal firm Cartesius, a broader interpretation of the proposed provisions would threaten crypto traders as well.
Moscow may deem the sale of cryptocurrency an illegal transaction
Under “illegal transactions,” the draft law now lists the issuance, transfer, and receipt of money without legal grounds as described in current Russian law, Likhunov noted in a podcast posted on Forklog’s YouTube channel.
If earlier, accountants forging payment orders and hackers writing malware were held liable for such transactions, liability is now being introduced for anyone who simply lends a bank card to a friend, explained the lawyer, himself a former investigator of financial crimes.
Since law enforcement officers like to interpret laws very broadly, and to their own advantage, this gives them leeway for arbitrary actions, believes the legal expert, who does not discount the law’s potential effectiveness in combating money mulling as a phenomenon.
If the bill is approved by Russian lawmakers, droppers can expect up to three years in jail, while their criminal leaders and also traders may get up to six years of prison time.
Likhunov noted that many Russians need cryptocurrencies as a result of the sanctions imposed on their country over the invasion of Ukraine. The main question, he stressed, is whether the sale of cryptocurrency will be considered an illegal transaction under the updated criminal law.
The lawyer elaborated:
“If so, then it will be possible to simply put everyone in jail. Drug addicts in pre-trial detention centers will be replaced by droppers and cryptocurrency traders.”
The founder of Cartesius highlighted that since 2022, he has been accepting only cash whenever he has had to sell cryptocurrencies, refusing any fiat payments to his bank card account.
So far, Russia has recognized mining as a legal crypto-related activity but has been reluctant to allow the free circulation of cryptocurrencies in its economy. In March, the Russian central bank proposed the establishment of an “experimental legal regime” for limited crypto operations.
The latter will allow the exchange of cryptocurrencies in a controlled environment reserved for “qualified investors” and the use of digital coins for cross-border settlements by Russian companies facing international financial restrictions.
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