Financial watchdog FATF reduces Russia’s rating over digital asset control deficiencies


  • The FATF has downgraded Russia to “partially compliant” due to flaws in its cryptocurrency regulation framework.
  • Russia’s 2020 “On Digital Financial Assets” law lacks clarity on authorized cryptocurrency providers, leading to increased illicit transactions.
  • Despite a previous high compliance score, geopolitical tensions and regulatory gaps have affected Russia’s standing in the international financial community.

The Financial Action Task Force (FATF) has recently adjusted Russia’s compliance rating to “partially compliant” in terms of its ability to monitor and combat suspicious transactions involving virtual assets. 

Reason for Russia’s downgrade

Reports from RBC indicate that this downgrade is primarily due to shortcomings in Russia’s 2020 “On Digital Financial Assets” legislation. The law defines digital financial asset (DFA) providers but does not clearly identify which entities are permitted to act as DFA and cryptocurrency providers, creating a gap in the regulatory oversight of digital currencies and assets.

Furthermore, Russia’s current digital financial services regulations prohibit the use of digital currencies for payment by its citizens, yet they lack a comprehensive framework for regulating and supervising cryptocurrency transactions. This lack of detailed regulation has been linked to an increase in illicit transactions using crypto assets. According to Rosfinmonitoring, Russia’s financial monitoring service, there has been a notable surge in illegal transactions involving cryptocurrencies, doubling in number in 2023.

The FATF, an intergovernmental organization aimed at setting global standards to prevent money laundering and terrorist financing, had awarded Russia the highest compliance score in 2019. However, Russia’s influence within the FATF was reduced in 2022 amidst geopolitical tensions, which has further complicated its standing in the international financial community.

Rosfinmonitoring’s data reveal a tripling in the volume of illegal crypto transactions from the start of the previous year to November, underscoring the pressing need for regulatory updates. The agency has called for quick action to address the regulatory vacuum and improve the country’s defenses against financial crimes facilitated by digital currencies.

Amid these regulatory challenges, there are reports that Russia is proposing the creation of a payment system among BRICS nations using central bank digital currencies (CBDCs) for trade settlements, aiming to enhance financial cooperation and reduce reliance on traditional global financial mechanisms.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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Damilola Lawrence

Damilola is a crypto enthusiast, content writer, and journalist. When he is not writing, he spends most of his time reading and keeping tabs on exciting projects in the blockchain space. He also studies the ramifications of Web3 and blockchain development to have a stake in the future economy.

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