Is Russia Set to Adopt Crypto-hostile Laws?
The government of Russia has preliminarily adopted its first-ever crypto legislation, but major questions concerning specifics still remain. Overall, it is fair to say that the legislation doesn’t look crypto-friendly.
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Crypto Laws See First Reading
The State Duma, the lower house of the Russian parliament, has adopted in the first reading a package of three draft laws aimed at bringing regulation into the crypto space.
To be enacted, the laws will need to pass the second and third readings, get approved by the upper chamber, the Federation Council, and ultimately signed by the president. However, the preliminary adoption is the first major step towards crypto regulation in the country.
Still, the adopted legislation has raised a number of questions and concerns among experts and crypto industry insiders, making Russia’s prospects of becoming a crypto-friendly country appear decidedly uncertain.
Cryptos Are Not a Means of Payment in Russia
The biggest issue with the adopted legislation is the fact that it fails to refer to cryptocurrencies as a legitimate means of payment. Moreover, none of the draft laws even provide a definition of cryptocurrencies or digital money.
As a result, cryptocurrencies are to be considered “other assets,” meaning that they will be subject to value added tax. Yet no guidelines for crypto asset tax reporting are provided.
Based on the adopted legislation, Russia appears keen to embrace a digital economy while remaining intent on bypassing cryptocurrencies. That threatens to slow the country’s progress toward becoming cashless. It will be particularly disappointing to the many Russians increasingly interested in using cryptocurrencies.
You Can Mine It, but You Can’t Spend It
Meanwhile, the legislation makes the mining of cryptocurrency a legitimate activity, and miners will have to register and pay taxes. Again, at the moment, the legislation lacks specifics regarding the taxation of cryptocurrency mining.
Unlike cryptocurrencies, the legislation provides much more clarity on ICOs. Clauses dealing with ICOs are likely to prove a major disappointment for startups considering token offerings to raise funding. The legislation stipulates that organizers of ICOs will have to sign agreements with every single investor, which is unfeasible. Similarly, no clear regulations regarding smart contracts are provided.
Coupled with rumors that the central bank could establish a cap of RUB 50,000 ($814 USD at the current exchange rate) for a single ICO investment by a private individual, ICOs originating from Russia will likely relocate to other jurisdictions.
A Step in the Right Direction
On a more positive note, the very existence of crypto regulation in the country will bring legitimacy to the blockchain industry, allowing blockchain-based projects to proceed with some confidence. This will be especially important for large state-run corporations, such as blockchain pioneer Vneshekonombank (VEB) or state-controlled lender Sberbank.
The legislation as proposed may only be making its first steps towards becoming fully-fledged law. Draft laws adopted in the first reading may or may not be substantially amended before being signed into law. With senior Russian officials apparently divided on how to treat cryptocurrencies and blockchain, the ultimate outcome is anyone’s guess.
However, if the legislation is enacted in its present form (or with only minor amendments), that will ensure Russia remains crypto-skeptical in the short term.
Have your say. Will Russia eventually become more welcoming of cryptocurrencies?
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