Russia blocks bitcoin websites over “shadow economy” fears

7 Comments

The Russian telecommunications regulator Roskomnadzor has blocked access to five bitcoin-related websites because the cryptocurrency “contributes to the growth of the shadow economy.”

The sites include Bitcoin.org, a primary community resource for the cryptocurrency that’s run by the Bitcoin Foundation, the Bitcoin.it community wiki, the Russian-language BTCsec.com security site, the London-incorporated Indacoin exchange, and Russian bitcoin community site Coinspot.ru — although the same service’s Coinspot.io address is not blocked, according to Roskomnadzor’s handy site-block checker.

Roskomnadzor has the power to order ISPs to restrict access to certain sites. Tuesday’s blockages stem from a court order dating back to September 30th last year, although they were only enforced today. In a blog post, the Coinspot.io team said no-one had contacted them directly about the court order, and they had no idea what the court in the city of Nevyansk, which issued the order, had to do with “cryptocurrency and the internet in general.”

An excerpt from the court’s decision posted late Tuesday on TJournal.ru read (according to Google Translate):

Introduction in Russia of other monetary units and production of money substitutes is prohibited. In such circumstances cryptocurrencies including ‘bitcoin’ are money substitutes, contribute to the growth of the shadow economy and can not be used by citizens and legal persons on the territory of the Russian Federation.

Legality issue

Bitcoin’s legal status in Russia is actually quite complicated. The authorities there said last February that it would be illegal to use it as a money substitute, highlighting its potential for criminal use by money-launderers and terrorists. In September, deputy finance minister Aleksey Moiseev said an outright ban may be instituted in 2015. Legislators have recently been talking about heavy fines for the use of cryptocurrencies.

However, the draft bill that would actually ban bitcoin in Russia was recently sent back for revisions by the Ministry of Economic Development, which complained that its definition of “money substitutes” was too general and could hamper corporate marketing programs.

Igor Chepkasov, the chairman of the Crypto Currencies Foundation of Russia, told Coindesk that he thought Tuesday’s blockages were “a dress rehearsal for the prohibition of bitcoin in Russia.” He urged enthusiasts to “unite and fight for their rights” and offered consulting and legal services to those affected.

Indacoin founder “Stan” (who did not want to give his full name) told me today that Indacoin’s hosting provider notified it beforehand that the blockage was imminent. He said his firm had already registered .net, .org and .io addresses, and these would go live in a few hours’ time. Stan, who is Russian, said the ban didn’t have a terrible effect on his business since only around 15-20 percent of Indacoin’s turnover came from the country (he said Indacoin’s turnover was around $1 million between May 2014, when the service began operations, and the end of the year.)

Stan said he thought the situation remained uncertain while the draft law remains under discussion. For that reason, he said, the court’s decision was inexplicable:

Bitcoin is not illegal here in Russia. It was not banned, so in fact they were not able to ban those websites. I guess they did it because they heard some buzz about regulations of bitcoin and bans of bitcoin, but they didn’t have deep insight into the situation.

The blockages are not comprehensive – for example, the Bulgarian site BTC-E, which does a fair amount of trade in ruble-bitcoin transactions, is not blocked in Russia. However, the targeting of the community resource sites in particular suggest that the authorities are trying to at least send a message. It may be relevant that the ruble is in a shaky position these days, thanks to sanctions related to Russia’s invasion of Ukraine, but then again bitcoin itself is less than a sure thing, having lost around half its value in 2014.

This article was updated at 8.55am PT to include and reflect the excerpt of the court’s decision.

7 Comments

CakeBet

Sounds like Russian officials have their priorities out of order. They should be stabilizing the value of their currency, not attacking the one that allows their people to do what they want to do.

EAO

If I lived in Russia I’d be spending all my money on bitcoins after the sanctions for what is going on in Ukraine started, and I’m just guessing that banning bitcoins now is a way to avoid everyone from doing that, because that would surely make the Russian currency fail.

Andrej Lukjanov

Erm… I’m from Russia and all mentioned web sites are available. The “handy site-block checker” states for bitcoin.org that “The requested IP address is not blacklisted”. What am I doing wrong? Also Russian web is replete with news about Roskomnadzor blocking these web sites. Maybe as of now they have cancelled the blockage? Of that I found no news though.

David Meyer

Thanks for letting us know – I will check that. They were most certainly blocked yesterday.

Mike

BitUSD would be perfect for Russians wanting to protect themselves against a falling Ruble.

K Rejaton

Nothing like closing the barn doors after the horses have run off.

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