The document defined the concept of "digital currency", forbade it to pay and advertise such an opportunity. We tell you how this will affect the development of the blockchain industry in the country
On July 22, the State Duma adopted the law "On digital financial assets" in the third reading. The document defines cryptocurrency, but prohibits its use in Russia to pay for goods and services. Advertising of digital money payment methods also falls under the ban. The new rules will come into force on January 1, 2021.
According to the law, digital currency is “a set of electronic data (digital code or designation) contained in an 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 ”.
What you need to know about the new law
Anatoly Aksakov, Chairman of the State Duma Committee on the Financial Market, explained that cryptocurrency was defined as a digital code that is used as a means of payment and a means of savings, as an investment. But in Russia it is prohibited to use it to pay for goods and services.
Also, criminal and administrative liability was removed from the document. According to Dmitry Kirillov, senior lawyer of tax practice at Bryan Cave Leighton Paiser (Russia) LLP, lecturer at Moscow Digital School, this does not mean that such norms will not be included in a separate bill. This is hinted at by the conclusion of the Legal Department of the State Duma.
“Compared to the May edition, the bill has been significantly revised. The rules on the regulation of digital currency (cryptocurrency in the usual sense) have been moved from a separate law to the law on the CFA, ”the expert explained.
The concept of digital currency is enshrined in clause 3 of Art. 1 of the draft law "On CFA". It is made universal and allows it to be applied not only to cryptoassets issued in Russian information systems under the supervision of the Bank of Russia, but also, for example, to bitcoin.
“This is a positive change, since initially in the Civil Code of the Russian Federation, in the law on crowdfunding and in the draft law“ On CFA, ”the Russian origin of cryptoassets was laid, which took the entire array of world cryptoassets out of the legal framework and made the prospects for the Russian crypto market very ghostly,” Kirillov added.
Within the meaning of the bill, digital currency is recognized as property, but not digital rights, which may require changes to the Civil Code. The revised cryptocurrency turnover is regulated by Art. 14 bill.
“The most controversial provisions allowing to receive and transfer digital currency only as inheritance, in bankruptcy or in enforcement proceedings have been excluded from the text. At the same time, the prohibition for Russian residents to accept digital currency as payment for goods, works and services, as well as to disseminate information about the possibility of settlements in digital currency, has been preserved, ”the lawyer emphasized.
There is still a need to declare (now it is called informing) about the ownership of digital currency and about transactions with it. This is a condition for judicial protection of such transactions.
According to the new version of the draft law "On Digital Financial Assets", cryptocurrency in Russia can be bought, issued, sold, and other transactions made, but Russian residents cannot be paid to it. There is a certain contradiction in this, since the very concept of cryptocurrency in the same document presupposes its use as a means of payment.
The bill makes a reference to separate laws that will regulate mining, the organization of the issuance and circulation of digital currency in Russia. It is possible that these laws will contain other restrictions for such operations, Kirillov warned.
“In general, the new version of the bill no longer looks as draconian as the May one, but it still embodies the struggle of the Central Bank with monetary surrogates,” the specialist concluded.
Problems of the Law "On Digital Financial Assets"
On May 21, 2020, a number of bills related to the circulation and issuance of cryptocurrencies and providing for administrative and criminal liability for violations in their use were sent to the Ministry of Economic Development. First, the documents were criticized in the community, then a negative position on them was expressed at once in several ministries, in particular, in the Ministry of Justice, the Ministry of Economy and the Ministry of Telecom and Mass Communications.
The Russian Association of Cryptoindustry, Artificial Intelligence and Blockchain Technologies (RAKIB) warned that the approval of the documents in the May edition would cause "irreparable damage to Russia." After criticism, the bills were found unsatisfactory and sent back for revision.
Elena Gultyaeva, head of the RACIB legal committee, member of the Commission on the Legal Support of the Digital Economy of the Moscow Branch of the Russian Lawyers' Association, recalled that the law "On Digital Financial Assets" has been under consideration in the State Duma for more than two years. However, the edition submitted for consideration in the second reading does not provide for the regulation of the entire range of relations regarding the creation and circulation of digital assets.
The draft law still does not provide for the possibility of remote identification of participants in transactions, which will not provide a full-fledged opportunity to attract investments to the market. However, the bill adopted in the second reading may become one of the tools that will ultimately provide the opportunity for the full-fledged work of the cryptoindustry in Russia, the expert said. She added that for this, the legislation should not contain norms that prevent the legal circulation of any digital assets, including cryptocurrency.
“In this sense, we positively assess the inclusion of the concept of digital currency in the draft law. Now we need a balanced approach to the formation of a law on digital currency so that the adopted norms ensure the balance of interests of the state and business and provide legal guarantees to participants to work with innovative tools, ”concluded Gultyaeva.
"Key to the industry is digital currency law"
The term of entry into force of the law "On digital currency" is due to the beginning of next year, January 1, 2021. Now the government is actively working to coordinate positions on the document "On digital currency". By September, lawmakers hope to come up with a text that will be most ready for public comment. The government has diametrically opposed positions regarding the legalization or prohibition of a new type of assets.
EXMO Exchange Development Director Maria Stankevich emphasized that the law “On Digital Currency”, which is still under discussion, is key for the industry. It was to this document that amendments were sent directly to the Ministry of Economic Development and the State Duma. According to Stankevich, the law "On CFA" is rather a glossary of concepts, from which it will be possible to build on in the future in lawmaking.
“We hope that the new document will be more complete and will contain a large number of updates that were previously sent as amendments. But we believe that it is too early to rejoice, because, as we have already mentioned, the current law is nothing more than a glossary. There may be surprises ahead of us, ”Stankevich warned.
The fact that the Russian authorities should take more active measures to digitalize the economy and high-tech industries in order to “expand the horizons of development” and “create a new structure of our economy” was announced by President Vladimir Putin in mid-July 2020. He called on the government to act more decisively and more actively to make the country globally competitive.
This year, the Russian authorities have developed a plan to support high-tech companies. The goal is to stimulate the export of Russian software and bring Russian startups from other jurisdictions back to the country. With the introduction of regulation of the digital money market, blockchain projects will also be able to count on preferences. In Russia, in addition to programs for digital money, hardware is also being developed, for example, devices for storing digital currency.