What does the Russian crypto community think about the adopted law “On Digital Financial Assets”?
On July 22, the State Duma adopted the law “On Digital Financial Assets” in its third reading. The document defines cryptocurrency and prohibits its use in Russia for payment of goods and services. Criminal and administrative liability have been removed from the law, but they may be included in a separate bill, according to RBC Crypto.
The requirement to declare (inform) about digital currency ownership and transactions remains. This is a prerequisite for legal protection of such transactions. According to the new version of the Law “On Digital Financial Assets,” cryptocurrency can be purchased, mined, sold, and otherwise transacted in Russia, but it cannot be used to pay Russian residents.
The bill refers to separate laws that will regulate the mining, issuance, and circulation of cryptocurrency in the country. The document could be adopted during the fall session of the State Duma. It is expected that this new type of asset will be fully incorporated into the legal framework on January 1, 2021. This date marks the entry into force of the Law “On Digital Financial Assets.”
In May, a package of documents sent by the State Duma to the Ministry of Economic Development and Skolkovo was discussed. Among other things, it included the bills “On Digital Financial Assets” and “On Digital Currency.” The former regulated assets backed by rights, where the issuer has obligations (for example, ICO tokens or stablecoins), while the latter regulated cryptocurrencies, including Bitcoin and other decentralized systems without a single issuing company. The law on digital financial assets effectively banned decentralized cryptocurrencies in Russia, a move that was harshly criticized by both Skolkovo and the Ministry of Economic Development.
The new version of the law “On Digital Financial Assets,” adopted on July 22, borrowed some provisions from the draft law “On Digital Financial Assets.” It defines digital financial assets and digital financial assets and primarily regulates the circulation of legally secured digital financial assets. Regarding digital currencies such as Bitcoin, the draft law does not include the draconian proposals made in May, but refers to separate documents that should regulate this category of assets. As a result, the question of whether Bitcoin will be legal in Russia remains unresolved.
It's certainly encouraging that the current version of the law no longer includes criminal and administrative liability, and cryptocurrency trading is not prohibited, as proposed in previous versions of the bill. However, many aspects of the industry remain unaddressed, and there are also controversial points, such as the definition of digital currency. It's likely that the law on digital currency, scheduled for adoption this fall, will ultimately become the primary legislation for the crypto industry.
For us, as a business operating data centers, this law is a positive development. According to the adopted document, Bitcoin is not a legal tender in Russia, but people can invest in it and mine it.
Our clients can officially purchase equipment, clear customs, install it in a data center, pay for maintenance, and thereby invest in cryptocurrency. Previously, our clients were concerned that mining would be banned. They threatened us with criminal liability.
Of course, people were wary of investing in data center infrastructure and buying new equipment. Now, however, we can move forward with the normal course of action. Against this favorable backdrop, we were officially approved for leasing a new transformer substation on July 23rd.
Reactions to the new law are mixed. This may be because it remains undeveloped and unfinished. Deputies rushed to pass the law during the spring session, so they minimized controversial issues as much as possible, but they relegated potential regulations to separate laws, which will now not be adopted until the fall. Surprises can be expected from secondary legislation, in the form of additional regulations, and from new registries.
Of course, the very existence of a legislative framework for future relations with cryptocurrencies is a positive development; at least the new law allows the purchase, sale, exchange, and pledging of cryptocurrency. The absence of administrative and criminal liability for mining is also a positive development; it is permitted in the new version.
However, after the adoption by the Federation Council and signing by the president, the ban on the use of cryptocurrency as a payment instrument for Russian residents will be enshrined in law. It will no longer be possible to accept cryptocurrency payments for goods, work, and services. This is a definite setback for the development of domestic payment systems and online services. Unfortunately, instead of developing a methodology for calculating the tax base for such payments, the government has decided to ban them entirely. Another negative aspect is that the new version still requires cryptocurrency to be declared.
The most negative aspect of the new law for our industry is the ban on advertising cryptocurrencies as a means of payment. Unfortunately, much of the information on websites in our industry is subject to various interpretations, and this will create new opportunities for abuse by prosecutors and courts. In the current climate, it's easier for them to ban a website or add it to the registry of banned sites for any mention of cryptocurrency than to investigate the context of the content.
If the hasty adoption of patently inadequate restrictions in the first drafts wasn't simply manipulation, then the situation is more positive than negative. While there's nothing alarming in the law so far, it's worth waiting for all the additional laws and regulations to be adopted to assess the overall situation.
