Bulgarian bitcoin exchange BTC-e has pulled support for the ruble, following a statement by the Russian Prosecutor’s Office.

In a notice issued today, the government agency said that it has seen growing interest in the cryptocurrency, including from money launderers. As such, it sought to clarify that cryptocurrency does not meet the definition of legal tender under domestic law.

“The official Russian currency is the ruble. The use of any other monetary instruments or surrogates is forbidden,” it said, citing Russian Article 27 of Russia’s Federal Law, regarding the Central Bank of Russia.

The announcement is the clearest indication yet of its position regarding cryptocurrencies.

It reads:

“The anonymous payment systems and crypto-currencies, including bitcoin – which is the most popular of them – are monetary surrogates. As such, their use by private citizens or legal entities is not allowed.”

BTC-e withdraws ruble support

In response, BTC-e announced that it would discontinue support for the ruble.

“In connection with decision-making in relation to the crypto-currency in Russia working with QIWI suspended indefinitely, as well as with other payment systems in Russia,” said the exchange, in a (translated) news posting only visible for those with their locale set to Russia.

[post-quote]

“All financial obligations are met in full means available without commission.

Recommend that you use the system OKPAY (USD, EUR), interest on the conclusion on it is reduced to zero.

We apologize for any inconvenience.”

In the last few days, BTC-e had reported some technical work on its QIWI interface. BTC-e did not respond to queries, but as of this evening UK time, there was no ‘deposit’ option for rubles on BTC-e’s account management pages.

Russia’s decision to clarify its opinion on how existing law captures bitcoin was made at a meeting of an inter-agency working group this week.

Attendees included the deputy chair of the Central Bank of Russia, and heads of relevant departments of the Bank of Russia. Officials from the Russian FSB and the Russian Interior Ministry were also there.

Market impact

This development wasn’t unexpected, however. The Bank of Russia issued a warning in late January, also citing Article 27, and warning that the issuing of cryptocurrencies in the Russian Federation could be considered illegal.

The head of Sberbank, the third-largest bank in Europe, has been bullish on bitcoin, affirming his support as recently as late January. But, the Bank of Russia is the state bank and a powerful institution that mirrors government policy.

The news comes on a bad day for bitcoin, following reports that Mt Gox had halted all bitcoin withdrawals.

That, along with the Russian news, is doubtless what sent prices plummeting today. The price had levelled out on 6th February after dropping around 4.5% to $804. Then, on 5th February at around 5:30 UK time, it began dropping drastically, reaching around $664 at 8am today. Twelve hours later, a rally appeared to have faltered, as prices dropped again.

At the time of posting, the CoinDesk Price Index stood at around $729.

Russia picture via Shutterstock