Russia's lower house of parliament, the State Duma, has adopted on its third and final reading a controversial bill known as the 'Digital Economy National Program,' which aims to isolate the Russian segment of the internet—Runet—from the rest of the global web. The legislation still requires approval from the Federation Council and President Putin's signature, but the overwhelming support in the Duma (over two-thirds of deputies voted in favor) signals strong political will to enact the law.
Key Provisions of the Runet Law
The law mandates that all Russian internet traffic be routed through government-controlled exchange points. It grants sweeping powers to telecom watchdog Roskomnadzor, including the ability to cut off internet providers that do not comply. Roskomnadzor will establish a monitoring center to detect threats and issue instructions, and it will also create and maintain a national domain name system (DNS). The goal is to ensure that online data transfers between Russian citizens, businesses, and organizations remain within the country rather than being routed internationally. The law is scheduled to take effect in November 2019, with rules governing Russian domains and cryptographic protection of information expected by January 1, 2021.
Criticism and Cost Concerns
The bill has drawn sharp criticism from various sectors of Russian society. Its implementation is estimated to cost the state budget over 30 billion rubles (nearly $500 million), and annual maintenance of the sovereign Runet could reach a staggering 134 billion rubles (over $2 billion). Artem Kozlyuk, leader of internet freedom organization Roskomsvoboda, described the law as 'absurd,' arguing that it will make the internet infrastructure more centralized and thus more vulnerable to cyber risks. 'Any decentralized system is always more robust against external influences, but the initiators of the bill are unwilling to realize that,' he told Bitcoin.com. Critics also fear the law could be used for censorship, likening it to China's Great Firewall, and protests have been held against it. If telecom operators bear the costs, internet prices for Russians could rise, and connection speeds may slow due to mandatory filtering equipment.
Impact on Cryptocurrency Industry
The Runet law is likely to negatively affect Russia's cryptocurrency businesses, which already operate in a legal gray zone. Proposals to regulate digital financial assets have been delayed for years, and crypto portals frequently face prosecution and blocking. While some lawyers have successfully challenged illegal blockings, prosecutors continue to seek court orders to ban platforms. 'In such conditions, it's difficult to provide these services, and Russian developers have been looking towards other markets,' Kozlyuk noted. Many VPN services have already refused to redirect traffic to Roskomnadzor, a move that could help maintain access to tools like Telegram for crypto communities. Nevertheless, the new law could further tighten controls, pushing crypto miners, exchanges, and blockchain startups to relocate to jurisdictions with clearer and more favorable regulations, such as Switzerland or Singapore.
The Runet law represents a significant shift in Russia's internet governance, with potential ripple effects across the digital economy, including the burgeoning cryptocurrency sector. Industry participants should monitor the legislative process closely and prepare contingency plans.