In this post:
- To monitor and stop over-the-counter cryptocurrency transactions through banks, Russia developed a centralized infrastructure.
- Targeting “droppers,” the system stops illegal cryptocurrency transactions all throughout the country.
- According to reports, dropper transactions affect more than 10 million Russians.
A new centralized platform is being developed by the Bank of Russia to detect and limit over-the-counter (OTC) cryptocurrency transactions.
The system will specifically target “droppers” or “mules,” or people who lend their bank accounts and cards for cryptocurrency-related transactions, pirate websites, drug stores, and online casinos, according to Bogdan Shablya, head of the central bank’s Financial Monitoring and Currency Control Service.
The platform is the first concerted effort by Russian authorities to systematically detect and stop cryptocurrency OTC transactions at the banking level, according to media outlet RBC.
This new approach would establish a single database that is available to all Russian financial institutions, whereas earlier efforts concentrated on keeping an eye on questionable activities within specific banks. The action was taken because Russian officials believe that bitcoin exchanges represent one of the largest segments using these informal banking networks.
Focusing on OTC crypto infrastructure
The new surveillance platform from the Bank of Russia is a clever strategy for upsetting cryptocurrency trading networks. Fundamentally, the system will build a centralized database that monitors people who might be involved in cryptocurrency transactions.
In order to complete OTC cryptocurrency trades, these “droppers” usually oversee several bank accounts at various institutions, which makes it challenging to detect them using conventional bank monitoring systems. The main technological feature of the platform is its capacity to exchange real-time data with all Russian financial institutions.
The technology will automatically compare a person’s details with the central database of recognized cryptocurrency facilitators whenever they try to open a new bank account. Before accounts can be used for these transactions, banks would be able to take preventive action because they will receive instant notifications about questionable applicants.
About 700,000 people have been recognized by the existing system as being involved in assisting illegitimate transactions, according to Shablya. After being reported by one bank, traders might easily open new accounts at other banks, which is a major flaw in the current safeguards that the platform seeks to fix.
The magnitude of drop operations
Illicit banking activities in Russia seem to be more widespread than previously thought. Data from the central bank indicates that over 10 million Russian residents have transferred money to accounts that have been as “dropper” cards.
This is happening even though many of these individuals may be unaware they were participating in unofficial crypto transactions. While traditional suspicious banking activities through business accounts decreased to 5 billion rubles in the first nine months of 2024, transactions through individual “dropper” accounts reached 39 billion rubles in the same period.
The current figure is a major increase from previous years, with the volume growing from 37 billion rubles in 2022 to 44.9 billion rubles in 2023. Bank officials note that crypto exchanges represent one of the primary drivers of this activity, alongside online gambling and other digital services.
Consequences for the Russian cryptocurrency market
The way Russians will be allowed to enter bitcoin markets has significantly changed with the launch of this centralized monitoring platform. The central bank anticipates that by focusing on the banking infrastructure that facilitates over-the-counter (OTC) trading, it will decrease illicit cryptocurrency transactions and direct trading in digital assets through authorized channels.
Traditional bank-based over-the-counter (OTC) trading methods will probably have to give way due to the immediate effects. Traders may need to look into other options or switch to officially approved platforms as the platform makes it harder and harder to use personal bank accounts for cryptocurrency transactions.
In the future, the platform’s deployment might hasten the growth of Russia’s regulated cryptocurrency infrastructure. The central bank, however, continues to take a cautious approach to cryptocurrencies.
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