Industry experts reveal a possible method for Bank of Russia to block crypto
Bank of Russia’s crypto restrictions through MCC would unlikely affect exchanges that have been operating illegally so far.
Amid the ongoing uncertainty about the future of cryptocurrencies in Russia, one local industry executive has disclosed a potential method for the Bank of Russia to block crypto transactions.
Andrey Mikhaylishin, CEO of the local crypto payment startup Joys, said that the Russian central bank is now considering several potential options to make its crypto ban possible, Forbes Russia reported Friday.
One of the possible restriction methods includes blocking debit card payments to crypto exchanges or wallets using merchant category codes (MCC), Mikhaylishin said. The report notes that the executive became aware of this blocking method from Bank of Russia employees.
MCC codes are four-digit numbers used by credit card processors like Visa or Mastercard to describe a merchant’s primary business activities. For example, crypto transactions are usually identified with the 6051 MCC code, while payments at grocery stores have the 5411 MCC code. According to the report, the Bank of Russia could oblige local banks to simply ban transactions with the 6051 MCC code.
While the potential plan is apparently still being discussed in Russia, some industry figures have questioned the effectiveness of such a strategy.
Maria Stankevich, a member of the Russian Committee on Blockchain Technologies and Cryptoeconomics, told Cointelegraph that potential MCC-based restrictions would trigger transparent businesses to leave the country while not affecting illegal crypto exchanges:
“I am 100% sure if they prohibit transfers to cryptocurrency with the right MCC, then honest exchanges will leave the market in the first place. There will remain grey crypto exchanges, which will do so-called miscoding, using other codes for transactions.”
Stankevich suggested that miscoding penalties at providers like Visa are insufficient for illegal crypto exchanges to stop their operations. As previously reported, there are several grey crypto businesses in Russia, with at least 50 of them located in Moscow City, a financial district in Russia’s capital.
The exec also expressed optimism about the cryptocurrency industry in Russia, pointing out that the Bank of Russia is essentially the only regulator that is against crypto adoption in the country:
“We have always known that the central bank is against crypto and wants it to be banned, but I still don’t think that this will be the way for Russia, because the central bank is in the minority there.”
“I personally know many high-ranking officials in Russia that understand the importance of crypto,” Stankevich added.
The news comes after Bank of Russia governor Elvira Nabiullina announced the Bank’s intention to prevent the local financial system from using crypto. Another exec at the bank subsequently claimed that Russians will only be able to invest in cryptocurrencies like Bitcoin (BTC) through foreign companies.