Sunday, November 27, 2022

Russian Crypto Regulation Draft Slammed as “Too Centralized”

Russian Crypto Regulation Draft Slammed as “Too Centralized”

The Russian crypto regulation draft law, proposed earlier this month, has been slammed by experts as “too centralized.” Just days after a new draft law on crypto regulation was proposed in Russia by a group of legislators led by Anatoly Aksakov, head of the financial markets committee at the State Duma, Russia’s lower chamber of parliament, it was met with heavy criticism.

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Putin the Brakes on a Decentralized Crypto Space

Experts of the Russia-OECD center at the Russian Presidential Academy of National Economy and Public Administration published a column in the major business daily Vedomosti, severely criticizing the recently released draft. The main problem the experts had with the legislation was the excessive centralization of the development of the crypto space in Russia that it stipulated. In fact, such a focus on centralization isn’t hugely surprising, as the country’s economy is heavily dominated by the state and state-controlled corporations.

However, the centralized model, which may have worked – at least, to some extent – for the traditional economy, looks totally out of place for the crypto space, which has always been based on the spirit of decentralization. The draft law substantially reduces options for ICOs and crypto transactions, limiting them to state-approved exchanges and thereby substantially curtailing opportunities that crypto could bring to the entire economy, the critics pointed out.

Restrictions, Bans, and a Lack of Detail

An approach based on restrictions and bans would substantially reduce all possible benefits from the adoption of crypto, they warned, adding that while imposing restrictions, the draft still lacked specifics that concern crypto entrepreneurs, such as depositing profits from sales of cryptocurrencies to a bank account or paying taxes on crypto assets.

Meanwhile, another major drawback of the legislation, according to critics, is its failure to stipulate the legalization of payments in cryptocurrencies for goods or services, another blow to the day-to-day use of crypto in Russia.

Other experts also pointed to substantial legal failings with the draft.Russian Crypto Regulation

Waves founder Alexander Ivanov and head of legal services for tech projects at Deloitte Artem Tolkachev analyzed the draft in a piece published on Forklog online magazine, saying that the draft failed to mention a number of serious issues, such as the nature of documents defining the operation of blockchain systems or relations between ICOs and traditional funding tools.

They went on to say that the draft in its current form stipulated a model of the crypto space, centered around a handful of approved venues of ICOs and trading, such as the Moscow Exchange (MOEX), which is set to limit the number of potential investors as well as the range of tools available to them.

Russian Crypto Regulation Could Be Improved

Still, the Forklog experts didn’t completely dismiss the draft, noting that it could be used as a basis for the country’s crypto regulation as long as it is substantially amended to facilitate the use of crypto’s potential, rather than reduce it to a highly centralized model.

A number of regions in the Federation had been seeking regulatory certainty to start up mining operations, with electricity rates and climate both being conducive to mining. Appropriate Russian crypto regulation would have helped kick-start a potentially profitable industry.

It remains to be seen whether the legislators will head the experts’ opinions or insist on a centralized and highly controlled model for the crypto sector.

Have your say. Will Russia amend its laws to move toward a more decentralized model for the use of cryptocurrencies?

Images via Prime Minister of the Russian Federation, Pixabay

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