Last week, Russian police arrested three businessmen for illegally trading in 500 million rubles worth of bitcoin, or around $9 million worth of the crypto-currency. The arrest marks the start of the first-ever criminal case against bitcoin sales in Russia, Vedomosti business daily reported on Sept. 1. The Russian government has a balancing act to do: they want to show that cryptocurrencies will not be tolerated as a money laundering unit, on one hand, while on the other hand want to show they are rolling out the welcome mat for bitcoin and similar technologies. It’s the latter, or risk losing out on major, global, life changing opportunities going forward.

According to Ministry of Internal Affairs press officer, Irina Volk, the three defendants illegally cashed the millions in bitcoin and are being brought up on charges of “Illegal Banking”. Their names have been concealed. Arrests were made approximately 260 miles northeast of Moscow in the city of Kostroma. The exchange came to light after investigators found an unusual amount of activity in bank accounts stemming from 300 bank cards and sim cards used to store the digital currency. The money was being shifted into different accounts owned by family members, prosecutors believe.

In the past, Russian courts have blocked bitcoin-exchanges and websites where people could transfer it into rubles, but they never brought anyone up on criminal charges for doing so. Russia surely has a problem with money laundering and where authorities believe it can crack down on activities, it will. Bitcoin, and Russia’s No. 2 crypto-currency, Ether, are new ways for Russians to avoid taxes and hide cash from ill-gotten gains.

The fact that 300 bank and sim cards were used in this transaction indicates on the part of authorities that there was something fishy about the transactions. Russians cannot legally transfer crypto-currency into rubles, but a working group on assessing the risks of exchange are being discussed in the Russian parliament.

Crypto-currencies represent both a challenge and an opportunity for Russia. Many of the big crypto-currency and their backbone support technologies are being designed by Russians. Vitalik Buterin, the man behind Ethereum’s open source blockchain computing platform and the ether currency, was born in Kolomna, a small city located roughly two hours southeast by car from Moscow. Russia would like more Vitalik’s to develop these new technologies in Russia, instead of in Silicon Valley. Russia has a chance to become a blockchain crypto-currency developer’s hub because it has the brain power and the talent to do so, but public policy is only just starting to catch wind of this.

In late July, the regulator for the Moscow Stock Exchange said that they were looking into legalizing crypto-currency trading on the MOEX. The backbone infrastructure is reportedly being built.

Russia’s Deputy Minister of Finance, Alexei Moiseyev, told the Rossiya 24 news channel on Aug. 29 that the exchange will first allow for qualified investors to trade in crypto-currency in order to avoid large money laundering operations. “We really need to be able to track deals and transactions in these currencies,” Moiseyev told Kommersant.

Eddie Astanin, chairman of the executive board at the National Settlement Depository of the MOEX, said in a statement that their goal was to create a secure and user-friendly accounting infrastructure for digital assets. “The platform will not only provide technological and legal protection of all parties involved, but will increase the variety of post-trade services for investors, custodians and new institutions emerging in this sector of the economy,” Astanin said, signaling that the Russians are aware of the potential.

A legal framework for bitcoin in Russia is still being devised by the country’s various central and financial authorities, but no concrete regulatory proposals have been put forth at this time. All of this could slow the process of ultimately legalizing the transfer of bitcoin into rubles. The political will exists to make it happen, but Russia is as keen as showing it can bust money launderers as it is showing that it’s a player in the new-digital economy.