- Evgeny Masharov’s Proposal to Criminalize Cryptocurrency Transfers
- Why the Proposal Emerged—and What It Means
- Lessons from Abroad: Harsh Bans Don’t Work
- Risks to Society and the Economy
- Possible Alternatives
- Where Is the Line Between Regulation and Repression?
Russia is once again discussing harsh measures against cryptocurrencies—this time, a proposal to introduce criminal penalties for transferring digital assets. The initiative has alarmed both experts and market participants. On the surface, the goal seems clear: to strengthen control and combat illegal schemes. But behind these strict legislative ideas lies a real danger—suffocating the entire industry and depriving thousands of people of their freedom.
Evgeny Masharov’s Proposal to Criminalize Cryptocurrency Transfers
Evgeny Masharov, a member of the Public Chamber Commission for the Public Examination of Draft Laws and Regulations, has proposed criminal liability—including imprisonment—for illegal cryptocurrency transfers. According to him, this is necessary due to the growing number of donations in digital assets made in support of the Ukrainian Armed Forces.
Masharov suggests using “time-tested” methods to fight such activity, recalling that during the Soviet era, the Criminal Code contained an article penalizing violations of currency regulations. He advocates bringing back a similar provision and extending it to cover both digital and foreign currency transfers.
Currently, Russia only bans the use of cryptocurrencies as a means of payment. This means that token and coin transfers between individuals are still allowed, as long as they are not used for goods or services. Therefore, before criminalizing such transactions, lawmakers would need to clearly define what actions are actually prohibited.
Masharov admits that his initiative will likely face resistance from free-market advocates and crypto holders. Still, he believes the criticism is unwarranted, arguing that the digital asset sector suffers from widespread criminal activity. However, data from TRM Labs shows that illicit crypto transactions account for less than 1% of all activity—while far larger sums are laundered through the traditional banking system.
Why the Proposal Emerged—and What It Means
Russian lawmakers are proposing prison sentences for crypto transfers conducted without approval from regulators. Officially, the idea is justified as a way to combat money laundering, terrorism financing, and tax evasion.
Yet cryptocurrencies are decentralized by nature—their transfers are not controlled in the same way as traditional bank transactions. Attempts to regulate them through criminal penalties could have far-reaching consequences:
• A sharp decline in legitimate market activity;
• A loss of public trust in crypto as a whole;
• A freeze on innovation and growing technological lag for Russia.
Lessons from Abroad: Harsh Bans Don’t Work
There are plenty of examples worldwide showing that severe crypto restrictions rarely succeed. In China, for instance, a full ban on crypto trading and mining has been in effect since 2017. The result? Most businesses relocated abroad, while the black market flourished.
India and Turkey experienced similar outcomes: attempts to limit transactions led to capital flight and a slowdown in domestic blockchain development.
By contrast, regulators in the U.S. and Europe have taken a more balanced approach — pursuing dialogue and adaptive regulation. Clear and transparent rules allow innovation to thrive while maintaining oversight. This approach has strengthened economic growth and technological leadership. In Russia, however, criminalizing crypto transfers could instead drive users underground and further criminalize the market.
Risks to Society and the Economy
Introducing prison sentences for cryptocurrency transfers would effectively turn millions of ordinary users into potential criminals. Such a policy would:
1. Encourage corruption within law enforcement (real money laundering is often easier to stop offshore).
2. Undermine legitimate startups and IT companies.
3. Push businesses to relocate abroad.
4. Create a shadow market full of risks for everyday citizens.
Moreover, enforcing such a law would be nearly impossible — no authority can monitor every transaction in a decentralized network.
Possible Alternatives
Instead of bans and criminal penalties, Russia could adopt a more balanced regulatory framework that aligns state interests with business development:
1. Improve financial literacy among users.
2. Implement KYC (Know Your Customer) and AML (Anti-Money Laundering) procedures for exchanges and service providers.
3. Legalize and tax cryptocurrency operations.
4. Establish clear and transparent rules for crypto companies.
These steps would help bring the market out of the shadows and support the growth of Russia’s tech industry.
Where Is the Line Between Regulation and Repression?
Criminalizing crypto transfers would be a step backward for Russia. Such a move risks killing innovation and turning an ordinary financial tool into a criminal offense.
While the rest of the world is integrating digital assets into the official economy, Russia risks being left behind. Instead of repression, the government should focus on creating clear, transparent regulations and fostering blockchain innovation within the law. Otherwise, the country could lose both its competitiveness and the trust of millions of citizens who are choosing a digital future.
