Crypto scammers operate physical offices in Russia, central bank says

The Central Bank of the Russian Federation (CBR) has reported that crypto scammers operate physical offices in the country to target its citizens.

In these physical locations, the scammers attempt to convince victims to purchase crypto assets or recommend services that will help them bypass restricting regulations in investment. Experts said that person-to-person interaction is more effective for such a scam.

Recent data by the CBR also showed higher activity of financial pyramids this year. In the first half of 2022, the central bank recorded 954 financial pyramid firms operating their schemes, compared to 146 firms last year in the same period or over a six-fold increase. Of those 954 fraudulent firms, 56 percent or 537 firms reportedly advertised digital investments.

Rising interest in crypto

According to the CBR, the increased number of physical crypto-fraud offices means that scammers have projected a growing crypto demand in the future.

Recent reports suggested that more Russians bought Bitcoins and other forms of cryptocurrencies to protect their assets from the Kremlin and move them out of the country.

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It was reportedly a result of sanctions by other countries over Russia’s invasion of Ukraine. The Russian government responded to the sanctions by implementing restrictions on foreign currencies, putting a cap on the forex assets that Russian residents can purchase or withdraw.

The CBR said that the scammers took advantage of the operational change in traditional banks. They pretend to offer alternative methods to Russian investors to protect their assets.

To counter the problem, the central bank eased up some restrictions on foreign currencies for the citizens of Russia. The ease enables banks to supply more U.S. dollars and euros to the citizens.

Crypto regulation in Russia

Despite the rising interest in cryptocurrencies in Russia, the country is not welcoming of the technology. Recently, President Vladimir Putin signed a bill that bans Russian people from using digital currencies as a payment method. The law also requires any digital financial platform in the country to submit transaction reports to the CBR.

The CBR also opposes private stablecoins, saying that the assets carry higher risks as the issuer does not own the pool. The CBR also said the stablecoin price was not stable. According to local experts, the central bank was wary of private cryptocurrencies, fearing they would be used to conduct illegal financial activities.

The Russian government recently announced a plan to launch digital rubble called the central bank digital currency (CBDC) across all banks in Russia in 2024. The CBR said the CDBC combined “all the advantages of digital payments and the reliability of national currency."

The CBR explained that the CBDC would be rolled out gradually to the public. There will be new trials and features introduced to users over the years. Once the system has aligned with the Federal Treasury, CBDC will feature consumer-to-business, consumer-to-government, business-to-government, and government-to-business payments.

Users can also access the digital rubble offline by 2025. The central bank said they planned to integrate the currency system into non-bank financial institutions and crypto exchanges.

“The phased process of introducing the digital rubble will provide market participants with the opportunity to adapt to new conditions,” the CBR said.