Russia wants to develop a system to track cryptocurrency transactions, and to know the identity of wallet owners involved in illicit activities. This project is launched against the backdrop of tense relations between the United States and Russia, following the cyber-attacks perpetrated by allegedly Russian hackers against hundreds of American companies.
Down with the masks, even for Monero and Zcash!
14.7 million rubles ($200,000): this is the amount that the country will allocate to the creation of a platform that will allow, among other things, to track cryptocurrency transactions, analyze the behavior of people behind it and know their identity.
To accomplish this mission, the country’s federal financial watchdog, Rosfinmonitoring, has selected RCO, a company run by Rambler Internet Holdings which is itself affiliated with banking giant Sberbank. RCO will also have to create and maintain a database of crypto wallets that are allegedly linked to illegal activities, including terrorist financing.
According to the Russian financial watchdog, Bitcoin (BTC), Ethereum (ETH) and Monero (XMR) are the cryptocurrencies most used by criminals. XMR, remember, is a privacy-focused cryptocurrency, which allows for anonymous transactions.
But for Nikita Zuborev, a senior analyst at Russian exchange aggregator Bestchange.ru, it’s entirely possible to lift anonymity, even on blockchains that are supposed to guarantee transaction privacy, such as Monero or Zcash (ZEC).
Transparency and appeasement in international relations
This platform, which is supposed to bring more transparency, should theoretically allow to identify or help hunting hackers who claim to be Russian, like REvil. The latter is indeed suspected of having launched a large-scale ransomware against more than 200 companies in the United States. In July 2021, it demanded a ransom of $70 million in BTC to restore the hacked data.
Yet this is not the first time that groups allegedly supported by the Russian government have harmed U.S. interests. For example, in June 2021, U.S. President Joe Biden warned his Russian counterpart, Vladimir Putin, against any Russian intrusion into U.S. infrastructure and databases, under threat of retaliation.
The Rosfinmonitoring initiative could therefore, on paper, improve the relationship between the 2 countries if it can stop hackers and deter further attacks. This operational device would soon be added to the new legislation in preparation announced by the Prosecutor General of Russia, Igor Krasnov, last July. A bill that will allow the government to confiscate cryptocurrencies.
Rosfinmonitoring is not at its first measure to monitor cryptocurrency transactions. It had already announced, in March 2021, a strengthening of controls on the exchange of digital assets for rubles. The fight against money laundering and terrorist financing remain the classic reasons cited against the right to anonymity in financial transactions.
