New Russian law on digital assets turned out to be very crude
The industry is neither regulated nor fully regulated
What can and cannot be done with cryptocurrency in Russia
International consortium of news organizations developing transparency standards.
A hitherto unknown thing happened the other day: the Russian authorities recognized “these coins of yours” and passed the law “On digital financial assets” (N419059-7) in three readings. Last time the law was rewritten in 2018, but it never got its logical conclusion due to the fact that it showed more a desire to ban what is not clear than to find a legal place for cryptocurrencies in the legal field of the Russian Federation. What has changed over these two years and what now awaits all representatives of the crypto community and those who sympathize with them? Let’s figure it out with the CryptoDiplomat.
The most poignant moments
Let’s consider some controversial points in quotes. The first one worth paying attention to:
“Mining is an activity aimed at creating a cryptocurrency and / or validation in order to receive a reward in the form of a cryptocurrency. Mining is recognized as an entrepreneurial activity if the person who carries out it exceeds the energy consumption limits established by the Government of the Russian Federation for three consecutive months. “
At the same time, according to BBC comments, the law on electricity consumption was adopted in 2018 and the authors of the analytical material highlighted the following point in it:
“It (electricity) will be fixed at around 300 kilowatt-hours per month and paid at the base rate. If this figure is exceeded up to 500 kilowatt-hours, an increased one, and with a monthly consumption of more than 500 kilowatt-hours, an “economically justified” tariff will be introduced, but the volume will be recorded not per person, but at the “connection point”, that is, the household. “
And here the first awkward situation arises: after the halving of bitcoin, it is impossible to mine it at home at all, since the profitability has fallen much below zero. Mining as such in Russia has already entered the stage of denial, and everyone who still somehow believes that they can mine their fortune at home have switched to cloud mining on pools, the capacities of which, at least at the legal address, are far beyond the borders of the Russian Federation.
Thus, the document does not regulate the work of cloud mining and does not even consider it as one of the offshoots of cryptocurrency mining. Also, the law does not define or separate PoW, PoS and DPoS algorithms. Mining is mining. And that’s it. At the same time, for mining in blockchains on PoS and DPoS, power for increased electricity consumption is not needed at all.
See also: Evolution of the law on cryptocurrencies in Russia: full version
And this is the first white spot of the law. Why does it exist? Because the law only slightly changes over the course of three years, and for the blockchain this is a period comparable to two or three generations of human life, and many concepts are hopelessly outdated. In addition, adequate advisors from the IT sphere would suggest the necessary glossary, but, apparently, people who are not active users of cryptocurrencies and are far from the entire sphere took part in the development of the law..
By the way, the law also does not include the concept of blockchain in the list of definitions. That is, coins appear just like that, from electricity that users consume. This can be used double-sided: if there is no blockchain, then everything that happens in it is not regulated by law. And if you call a resource not a “coin” or a “token”, but “funny round think”, and even validate it through DPoS, then the law will be powerless to regulate the company’s activities. Profit.
Move on. The following quote can be extracted from the document:
“The maximum amount for which persons who are not qualified investors in accordance with the Federal Law” On the Securities Market “can purchase tokens within a single issue is established by the Bank of Russia.”
It can be supplemented with this part:
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“The public offer for the issue of tokens must contain information on the maximum amount for which tokens can be purchased by persons who are not qualified investors in accordance with the Federal Law” On the Securities Market “;
We can see that any cryptocurrency startup, as conceived by the developers of the bill, must be strictly centralized and obtain permission from the Central Bank and fully describe the behavior of the future owners of the crypto. Moreover, neither the cost of coins is taken into account (there is not a word about it), nor other specificity of the volatility of cryptocurrencies.
By the way, the law does not regulate airdrops and bounty programs in any way. In other words, you can give crypt in any quantity, which can lead to an interesting effect similar to the “alcohol as a gift when buying a magnet” campaign: cryptocurrencies can be an add-on to a purchase, for example, 10 pairs of sneakers with Aliexpress, or a gift for a ton of whiskey, which is also good in its own way.
What follows is a completely infernal definition:
“The term“ beneficial owner ”is used in this Federal Law in the meaning defined by the Federal Law of August 7, 2001 No. 115-FZ “On Counteracting the Legalization (Laundering) of Proceeds from Crime and the Financing of Terrorism” (hereinafter – the Federal Law “On countering the legalization (laundering) of proceeds from crime and the financing of terrorism”). “
And this is precisely where the devil lies: just as earlier it was possible to call any suspicious or objectionable company a “foreign agent”, so now the managers of crypto startups can be pulled for the fifth point in the category of “beneficial owner” , even if the project’s capacities are located in Ireland. and the legal address is in the Seychelles.
And this is very, very bad, since the authorities have received a legitimate leverage over the Russian IT sphere. It is difficult to judge how dire the consequences will be, but it is this part of the law that causes us the greatest discomfort..
The law also explains that digital currency is “a set of electronic data (digital code or designation) contained in the information system, which are offered and (or) can be accepted as a means of payment that is not a currency of the Russian Federation , a currency of a foreign state and (or) an international monetary or unit of account, and (or) as an investment and in respect of which there is no person obligated to each owner of such electronic data “.
From this it follows that the definition includes any digital chips, tokens and even cards from HardStone, as well as in-game currencies in most online games. Only poor knowledge of the issue and poor imagination can stop the possible arbitrariness of regulatory bodies. In addition, payment for services in digital currencies and their advertising fell under the ban. Before the law comes into force, crypto startups have 5 months left (until January 1, 2021).
What else you need to know about “digital assets”?
The lawmakers removed from the document clauses on liability (both criminal and administrative). Also, in the first edition there were such moments as the transfer or receipt of cryptocurrency is possible only with inheritance and bankruptcy.
At the same time, the law obliges to declare possession of currency and inform (the official term of the bill) about any transactions. Only in this way, according to lawmakers, can the parties in crypto relations be protected. Well, yes, well, yes, we readily believe. In addition, the law does not in any way regulate the release and putting into circulation of the tokens or cryptocurrency themselves..
And, of course, cryptocurrency is not a means of payment, but completely falls under the property during bankruptcy and the fight against corruption. In other words, it can be seized as property. And this is a huge, downright monstrous factor with which you can influence Russian cryptocurrency holders..
Imagine a situation: you have several bitcoins and you owe a certain amount of fines for incorrect parking. Then bailiffs, by court order, can seize your crypto assets at a rate, for example, 8 years ago. Of course, in practice it is very difficult to implement and hardly anyone will be interested in private holders, but as a precedent – this may well happen.
The Ministry of Justice, the Ministry of Economy and the Ministry of Telecom and Mass Communications sharply stood up for the protection of cryptocurrencies, since the original draft laws proposed absurd regulatory methods with which the circulation of any cryptocurrency, except for those created and implemented under the supervision of the Central Bank of the Russian Federation, is completely prohibited. In other words, all cryptocurrencies were banned in general. Praise Satoshi, this version of the bill did not see the light of day.
What’s at the end of the tunnel?
In fact, there was no regulation either. The document simply plugs a hole in the legislation, formally fulfilling the role of a “night watchman” who, as it were, does not care deeply about what is happening in the territory under his jurisdiction. For ordinary users who use cloud mining or staking, as well as store their crypto savings in foreign software or hardware wallets, nothing will change with an absolute account.
Another thing is that the law is very harsh on Russian startups, which felt good enough without regulation and replenished the state treasury. By and large, Russian companies with a legal address on the territory of the Russian Federation will face a massive outflow of users, which will either lead to the flight of IT intelligentsia to neighboring countries, or to the equally global extinction of the Russian blockchain community as a phenomenon.
Whether the law will be applied in practice or will go to the background or even the third plan, like the “Yarovaya Package” – it will be possible to say after the New Year holidays, but the preliminary verdict is this: only those who have a lot of crypts will be squeezed. And how many of these people are left in Russia, if you don’t count the authorities? Few, but it may well end up in the opposition, just like millions under the bed. So wait for news that an underground crypto investor had a lot of ETH in a wallet accidentally discovered and it doesn’t matter what it is – not money. No question, times are interesting and dark.
What can you do with crypto if you live in Russia?
What you can:
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- To give
What is not allowed:
- Pay with crypto for purchases
- Sell / buy crypto for fiat
- Possess a lot of coins
- Make transactions anonymously
- Invest in crypto projects anonymously
The author of the article is the founder of the boutique consulting agency CryptoDiplomat.ch Georgy Paliani.
This material reflects the point of view of the author, which may not coincide with the opinion of the editorial board of BeInCrypto.
All information contained on our website is published in good faith and objectivity, and for informational purposes only. The reader is solely responsible for any actions he takes based on the information received on our website..
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