Russia's lower house of parliament, the State Duma, has taken a significant step towards formal oversight of the country's burgeoning cryptocurrency market by advancing a sweeping bill to regulate digital currencies. The draft legislation, titled "On Digital Currency and Digital Rights," received overwhelming approval in its first reading, with 327 out of 340 deputies voting in favor. Introduced by the Russian government, this bill proposes a comprehensive framework that will govern the issuance, trading, and storage of cryptocurrencies within the nation. If fully adopted, the law is slated to come into effect on July 1, 2026, though certain provisions may have later implementation dates.

The proposed legislation meticulously defines key legal concepts crucial for regulating the digital asset space, including the "circulation of digital currency" and the "organization of digital rights circulation." It also delineates specific entities authorized to operate within the market, categorizing them into five regulated participant types: exchanges, brokers, management companies, depositories, and exchangers. A core requirement is that all these entities must obtain appropriate licenses and operate under the stringent supervision of the Bank of Russia. The central bank is poised to gain extensive authority, including the power to authorize, regulate, and oversee these market participants, as well as to impose transaction limits and compliance requirements.

A central tenet of the bill is the explicit classification of digital currency as property. This reclassification holds significant legal implications, enabling crypto holdings to be formally recognized in various legal disputes, such as bankruptcy proceedings and divorce settlements. Despite this recognition, the legislation maintains a strict prohibition on using cryptocurrency for domestic payments, firmly establishing the Russian ruble as the country's sole legal tender for internal transactions. However, critically, the bill permits the use of digital currencies in foreign trade. This provision is seen as a strategic tool to help Russian firms navigate international sanctions by facilitating cross-border settlements with overseas partners outside conventional financial systems.

To manage investor participation, the bill introduces a tiered system. Qualified investors will benefit from fewer restrictions, while non-qualified participants will be required to pass specific tests and may face annual limits on their cryptocurrency purchases. This structure aims to mitigate risk exposure for retail investors. Access to crypto markets will be exclusively channeled through licensed intermediaries, with direct transactions without such intermediaries facing tighter controls. A broader ban on direct transactions is scheduled for 2027. Until then, peer-to-peer transactions remain legal, though enforcement measures like payment blocking and blacklisting mechanisms are expected to be implemented sooner.

Furthermore, the legislation addresses digital asset custody through the establishment of a new digital depository system. This system will manage crypto holdings, imposing restrictions on transfers to personal wallets and limiting withdrawals to approved foreign institutions. Mining activity is also integrated into the regulatory framework, with rules mandating the use of Russian infrastructure and formal accounting practices for all mined assets. Despite strong initial support, some lawmakers and parliamentary committees have called for revisions. The State Duma Committee on Competition Protection expressed concerns that excessive regulation could stifle market development, while the Committee on Financial Markets advocated for greater clarity regarding non-custodial wallets and stronger legal safeguards for privately held assets. The bill must undergo two additional readings in the State Duma before progressing to the Federation Council and ultimately to the president for signature. Amendments for the second reading are due within two weeks.