The DFA bill, named “On Digital Financial Assets,” decrees that on January 1, 2021, transactions with cryptocurrencies involved will be legalized. However, the catch is that crypto enthusiasts will not be able to use Bitcoins (BTC) and altcoins as a form of payment, but rather, they would have to conduct business payments with fiat money.
The law will come into force on Jan. 1, 2021.
While the DFA bill provides the foundation for Russia’s cryptocurrency legislation, the regulation of the industry will mainly be a part of a different bill
The actual regulatory framework for crypto will be set out in the bill “On Digital Currency,” or DA. As reported, the Duma expects to pass the DA bill during the autumn session.
The law gives a definition to digital currency, stating that it “is recognized as an aggregate of electronic data capable of being accepted as the payment means, not being the monetary unit of the Russian Federation or a foreign state, and as investments.”
The law sets forth that digital financial assets “are digital rights comprising money claims, ability to exercise rights under negotiable securities, rights to participate in equity of a non-public stock company and right to claim transfer of negotiable securities set in a resolution on the DFA issue” These assets can be sold, purchased, exchanged, and pledged. However, they cannot be used as a means of payment.
A number of cryptocurrency-related terms were excluded in the final bill after the second reading, such as “token” and “mining”.
The law provides that decentralized cryptocurrencies are considered a type of property, which should be reported for tax purposes and cannot be used to pay for goods and services.
Russian banks and exchanges can become exchange operators of digital financial assets provided that they register with the central bank, the Bank of Russia. The bank will reportedly be able to impose additional requirements to crypto issuers as well as cryptocurrency exchanges.
Individuals and legal entities in Russia will only be able to challenge cryptocurrency transactions in court if they have declared these transactions and their possession of cryptocurrency
The new law will allow local firms to issue stablecoins — a “stable” type of cryptocurrency that is often pegged to fiat currencies like USD.
Russia’s customized approach will facilitate crypto handling for companies, traders, investors and other participants of the digital sphere. As the three-tier regulation provides separate rules for each type of crypto assets, it will be easier to clarify the right law and remain compliant.
The experts believe that the Russian government has been asleep at the wheel, and it has no idea what is going on in the world of crypto and blockchain.
Taking into consideration the interest of many international investors to Russian securities, Russian ICOs will provide them with one more valuable flexible investment option. However, the investors will have to wait until the Duma considers the second package on DFA and the Central Bank clarifies “the rules of the game’.
If you would like to discuss any issues regarding cryptocurrency and CIS practice that your business might be facing, then please contact our consultant Dmitry Gololobov on 07921 160 108 or at dmitry.gololobov@ilaw.co.uk.
