Bank of Russia and Rosfinmonitoring Reveal Fiat-to-Crypto Tracking System Pilot

The Bank of Russia and Rosfinmonitoring revealed the existence of a ‘know your crypto customer’ system pilot, that aims to link the fiat operations of crypto users with their blockchain actions. The pilot, which has been ongoing since 2023, involves five banks in Russia and is expected to run until April, but can be extended.

Bank of Russia and Rosfinmonitoring Reveal Crypto Tracking System Pilot

Russia has been trying to track cryptocurrency transactions and its origins since 2023. The Bank of Russia and the Federal Financial Monitoring Service of the Russian Federation (Rosfinmonitoring) revealed the existence of a system that allows private banks to track the connection between fiat-based transactions and cryptocurrency operations.

The announcement was made at the “Current AML/CFT Issues” forum, organized by Rosfinmonitoring, where it was also disclosed that the pilot started in 2023 and five large credit institutions were collaborating with Rosfinmonitoring.

Ilya Bushmelev, director of project portfolio management at Innotech, a Rosfinmonitoring partner, explained the difficulties government agencies face when linking the fiat and crypto worlds. “Credit institutions currently have every opportunity to work with fiat, but cryptocurrency transactions are now still considered separately,” he stressed.

This pilot might help banks to establish “Know Your Crypto Client” and “Know Your Crypto Transaction” procedures, Bushmelev stated, remarking that the system might be useful for compliance and regulatory purposes.

Tinkoff Bank, one of the banks participating in the system’s pilot, related how the tool allows them to classify the role of some customers in an illegal drug trafficking ring. Tinkoff Bank Compliance Director Galina Kuznetsova explained that depending on the number and time of transactions, these can be identified as buyers of narcotic drugs, pawnbrokers, dealers, or exchangers.

She added that the tool presented many advantages, explaining that it allowed financial institutions to “not to shoot sparrows with a cannon” and not to fight “a war for banks alone.” The Bank of Russia estimates that Russians transacted $51 billion using crypto in 2023.

The pilot was slated to end this May but might be extended indefinitely depending on the results obtained.

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