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Moscow's Chinese Merchants Using OTC Cryptocurrency For Bank-Free Money Transfers




A department head with the Central Bank of Russia has said that many of the predominantly Chinese traders at informal marketplaces in Moscow are converting their earnings to cryptocurrency and sending them back to China.

A representative of Russia's central bank has said that the bulk of the funds that change hands at three of Moscow's largest informal marketplaces, estimated at 600 billion rubles per month (over $9 billion at press time), are converted from cash to cryptocurrency and sent to China. Most of the money that leaves Russia does so without being deposited to a bank.

At an April 12 forum, Yuri Polupanov, the head of the bank's Financial Monitoring and Foreign Exchange Control Department, said that unlicensed, over-the-counter (OTC) cryptocurrency exchanges have sprung up in the shopping centers known as TC "Moscow," "Food City," and TC "Sadovod" (the latter of which is co-owned by Ilham Rahimov, a former classmate of President Vladimir Putin). Polupanov said that some 90 percent of the merchants trading at these marketplaces are Chinese.

Commerce at the three centers reportedly accounts for as much as a quarter of all retail trade across the country and exceeds the volume of formal-sector retail trade in the city. In Polupanov's words, these marketplaces have become "pioneers and leaders on the proposal to buy cryptocurrency," with traders converting rubles to virtual currency, transmitting those funds to their home countries, and reconverting them into local fiat currency there.

Having conducted fairly extensive research into the practice, the central bank will turn its findings over to "law enforcement bodies."

Elena Sidorenko, who heads an interdepartmental working group on cryptocurrencies at the State Duma, the lower house of Russia's legislature, said it is widely known that Chinese traders use cryptocurrencies to send their revenues abroad. While she anticipates that forthcoming laws regulating cryptocurrency will make it easier to control these cash flows, she also urged prosecutors to take up cases involving these OTC exchanges, arguing that many crimes "are connected with migration policy and money laundering, and it [is] time to sort this out."

Bills seeking to regulate cryptocurrency and the conducting of ICOs have already been submitted to the State Duma.

For their part, Chinese authorities have expressed concerns that cryptocurrency trade can facilitate capital flight. With the proceeds of informal retail in Moscow being spirited away to China, it seems that in addition to Russia's economy hemorrhaging capital, its government is ostensibly losing out on an opportunity to collect taxes.

Adam Reese

Adam Reese is a Los Angeles-based writer interested in technology, domestic and international politics, social issues, infrastructure and the arts. Adam holds value in Ether, Bitcoin, and Monero.

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