Evolution of the law on cryptocurrencies in Russia: full version

CONTENT

  • Russia has been trying to pass a law on cryptocurrencies since 2018

  • The contradictory position of various departments slows down the process

  • Russia may be among the cryptocurrency aggressors

International consortium of news organizations developing transparency standards.

With the advent of cryptocurrencies, it became necessary to include them in current legislation, while regulators in many countries, including Russia, faced a number of problems. It turned out to be more difficult to incorporate digital assets into the current legislation than originally anticipated due to the special nature of the new financial instrument.

* This article is being updated

In the Russian Federation, the regulatory framework for cryptocurrencies has been developed for several years. Despite such a long-term construction, digital assets in the country still exist outside the legal framework. To demonstrate at what stage the initiative is, the editorial staff of BeInCrypto traced the entire path of the formation of crypto laws in Russia.

First steps towards regulation

Work on the formation of a legal framework for cryptocurrencies in Russia began in the fall of 2017 by order of Russian President Vladimir Putin. The head of the country instructed officials to prepare amendments to the current legislation by July 1, 2018 to regulate a new financial instrument.

At the end of May 2018, the State Duma presented a package of three documents, which are popularly dubbed “digital”: 

  1. “On digital financial assets”. 
  2. “On attracting investments using investment platforms”.
  3. “On digital rights”. 

They were made up of a group of deputies headed by Anatoly Aksakov, Chairman of the State Duma Financial Market Committee. 

The State Duma adopted all three documents in the first reading on May 22, 2018. The draft laws “On attracting investments using investment platforms” and “On digital rights” were soon adopted. The first entered into force on January 1, 2020, the second on October 1, 2019. The draft law “On digital financial assets”, in turn, was not so unambiguous.

The first pancake is lumpy 

After reviewing the documents, a lengthy process of finalizing them began. Most of the questions were raised by the draft law “On digital financial assets”. For example, the deputies were not satisfied with the term “digital money”, which the authors of the documents used to classify cryptocurrencies.. 

The amendments were also made by the Prime Minister of the Russian Federation Dmitry Medvedev. Studying the first edition of the documents, he drew attention to the fact that in the legislation it is impossible to use such x “slang”, in his opinion, words as “mining” and “cryptocurrency”. 

Another problem was the lack of a number of interpretations and regulations for areas adjacent to the digital asset market, including the mining industry..

Subsequent readings on the “digital” package dragged on. The State Duma ignored the deadline set by the President of the Russian Federation for July 1, 2018. The deputies explained the slow pace by the fact that the decree issued by Vladimir Putin is not an actual order for them, which requires strict adherence to the time frame. 

Subsequently, there were several more deadline disruptions in the history of the draft law “On digital financial assets”, including November 2018, March 2018 and October 2019. At the same time, the acceptance of documents during the readings is only one of the points that must be passed. The general sequence of actions aimed at creating a legal framework for cryptocurrency is as follows:

  1. Development of bills and their adoption during readings.
  2. Submission of documents for approval to the Federation Council.
  3. Signing documents by the president.

In mid-January 2019, the deputies presented a revised version of the bill “On digital financial assets”. In the new edition, the authors focused on expanding the concept of “digital financial assets” (DFA). Also, the deputies revised fragments of the text that could be interpreted as a permit to legalize cryptocurrencies in the country.. 

Comparison of the two editions, using the term “digital financial asset” as an example:

Cryptocurrency News 13th January TenX Ethereum Russia Financial crisis Gold Monero

First edition (2018) Second edition (2019)
CFA – property in electronic form, the creation of which involved cryptography. Proof of ownership is carried out using digital records in the ledger, which records information about transactions. The term “CFA” applies to cryptocurrency and tokens. The term “DFA” can mean mandatory and other rights. For example, monetary claims, rights to issue securities and rights to transfer them. Rights are established and consolidated during the decision on the issue. Information about securities (data on the issue, circulation and other accounting) must be fixed in accordance with federal law in a system built on the basis of a distributed register.

 

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Evolution of the law on cryptocurrencies in Russia: full version

The new edition suited the government. The documents were partially approved, but the Council for the Codification and Improvement of Civil Legislation came up with a proposal to return the bill to the stage of the first reading. Representatives of the organization drew attention to a number of omissions in the new edition. For example, they were not satisfied with the inappropriate, in their opinion, use of the term “digital rights” in the text of the document. Anatoly Aksakov rejected the organization’s proposal to “roll back” the version of the bill to the version of the first reading. 

During one of the interviews, the deputy explained the position of the State Duma, which the authors of the documents are guided by in their work. According to him, cryptocurrencies will enter circulation, as an alternative to the ruble, only if such a permit is issued by the Central Bank of the Russian Federation. Until the financial regulator has approved digital assets, the document should exclude the possibility of any misinterpretation.. 

The Central Bank of the Russian Federation, in turn, is strongly opposed to any form of legalization of cryptocurrency in the country. Find out more about the position of the regulator from our material.

No laws – no business

The lack of results of work on the formation of a legal framework for cryptocurrencies had a negative impact on the possibilities of doing business in the Russian Federation. The situation with the Norilsk Nickel blockchain platform of businessman Vladimir Potanin was indicative. The site received the approval of the Central Bank, but was unable to launch in the country due to the lack of the necessary legislation. 

At the end of March 2020, Anatoly Aksakov once again announced the postponement of the adoption of the bill. This time, he said, the reason was the problems that the State Duma faced amid the coronavirus pandemic. According to the previous version of the deputy, the adoption of the bill should have taken place during the spring session.

Despite the lack of a regulatory framework, in the spring of 2020 Russia entered the top 10 most influential countries in terms of capacity allocated for bitcoin mining. 

Russia’s position on the map – distribution of computing power allocated for Bitcoin mining, as of June 24, 2020. Data: cbeci.org

Third edition of the bill on CFA

At the end of May 2020, the authors of the bill presented its new version. Contrary to the expectations of the crypto community members, the deputies proposed to tighten the regulation of the cryptocurrency industry in the Russian Federation. 

The authors included administrative and criminal liability for illegal transactions with digital assets in the bill. For example, the deputies proposed to imprison a person who caused “damage to citizens, organizations or the state” on an especially large scale (from 9 million rubles) for a term of 7 years. 

Find out more about the editorial board and the punishments that MPs have proposed for illegal owners of cryptocurrencies from our material.

Criticism of the new version

The new version of the bill was sent for approval to the Ministry of Economy of the Russian Federation. After studying the document, representatives of the Ministry of Economy criticized it. Information about this appeared on the network on June 10. 

According to representatives of the department, the new edition implies a ban on the circulation of cryptocurrencies in the country, which is unprofitable for the Russian economy..

The ministry noted that the next version of the bill criminalizes work with digital assets. If adopted, according to the regulator, crypto startups and other businesses related to the cryptocurrency industry will leave Russia. As a result, because of the bill, the state treasury will suffer.

In particular, crypto companies may leave the Russian Federation for Ukraine. Recall that the country’s authorities are ready to get ahead of Russia with the adoption of the bill on cryptocurrency.

The new edition was also criticized by representatives of the Ministry of Justice of the Russian Federation. In their opinion, it is impossible to organize effective work on the basis of the bill. In particular, the Ministry of Justice drew attention to one feature – the ban on the purchase of cryptocurrencies blocks the possibility of selling digital assets in the event of their arrest.

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Against the background of criticism of the new bill, the growth in the volume of purchases of bitcoins for rubles in the Russian Federation slowed down somewhat:

Data: LocalBitcoins

New promises

On June 16, 2020, the media reported that the draft law “On digital financial assets” is ready for adoption. Anatoly Aksakov said this during an interview. According to the deputy, in the new edition, the authors came to a consensus, which united the interests of the state and entrepreneurs.

Despite the lengthy work, Anatoly Aksakov clarified that the next version of the bill is still “raw”. According to him, the bill presents different points of view that need to be discussed during discussions..

“The law“ On digital currency ”is very controversial,” the deputy noted during another interview..

According to media reports, the Russian government supported the early adoption of the bill. Earlier, the Russian Union of Industrialists and Entrepreneurs (RSPP) and Vladimir Potanin approached Vladimir Putin with a request to accelerate the development of a legislative framework for cryptocurrencies in the country..

Earlier, OKEx top manager Ksenia Oshurko told BeInCrypto why increased attention to the legal regulation of cryptocurrencies is a good sign.

As of June 24, 2020, there is no new date for the adoption of the bill. Presumably, the meeting will take place in the fall. The material will be updated as the news comes out.

Disclaimer

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Evolution of the law on cryptocurrencies in Russia: full version
Evolution of the law on cryptocurrencies in Russia: full version
Evolution of the law on cryptocurrencies in Russia: full version

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