Monday, December 5, 2022

Russian Ministry’s Strict ICO Regulations May Damage Industry

Russian Ministry’s Strict ICO Regulations May Damage Industry

The Russian Legal Information Agency (RAPSI) has reported that initial coin offerings (ICOs) and other uses of blockchain technology will be policed by the Russian government. Meanwhile, the Russian Ministry of Telecom and Mass Communications (MinComSvyaz) have presented new regulations for ICOs. But do the proposed regulations go too far?

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New Regulations Safeguard Investors – Or Demotivate ICO Projects

Igor Shuvalov, First Deputy Prime Minister in Dmitry Medvedev’s Cabinet, speaking at the “The Intellectual Property in Digital Age”, said ICOs will be regulated by the government.

Even though Shuvalov had said there was no need to prepare a distinct law, the Ministry of Communications issued a draft decree aiming to regulate the crypto market anyway, contradicting Shuvalvov’s statements.

Under the new rules, ICO organizers will be compelled to offer buy-back support. Moreover, token issuers are required to hold registered capital of 100 million rubles ($1.75 million USD) in a Russian bank before issuing tokens.

To safeguard investors from fraud in the ICO industry, the Ministry of Communications has set out stringent draft laws. According to local news website Kommersant, the draft decree was published on the website.

The document published by the Ministry expounds digital tokens as “records in a distributed information system, created through cryptographic algorithms.”

Only Rubles for ICO Projects

Russian Money

According to Kommersant, some of the important points in the draft decree are that companies issuing digital tokens will have to assure they can redeem investors’ tokens at “nominal price”. Special contracted companies will ensure that ICO projects comply with the draft decree. Moreover, ICO organizers can sell their digital tokens only in rubles.

Companies that plan to raise funds through ICOs must be registered with the Russian Federation government. To build more trust in ICO projects, companies can seek special accreditation from the Ministry of Communications. Also, businesses must possess a license to develop and distribute digital tokens.

Harsh Criticism From the Industry

Arseniy Sheltsin, Director of the Russian Association of Crypto-Currency, told Kommersant: “It is difficult to comment on this decision in any of its variations because it is divorced from reality,”

Several others in the blockchain industry have denounced the decree since it does not cover critical nuances of ICOs, such as pre-sales.

Artem Inyutin, managing partner of the TMT Investments venture fund, stated: “The way our bodies formulate will be interpreted in such a way that business will not be possible to conduct. They will interfere with business, that’s what I’m afraid of. Documents are often ambiguous, which can interfere with the ICO process.”

He also noted that no ICOs are even held in Russia, and most businesses move abroad. Many crypto industry participants highlighted that the new set of rules from the Ministry of Telecom and Mass Communication only discourages tech companies.

Is it right for the Ministry of Telecom to regulate ICOs in the name of safeguarding investor interest? Let us know your views in the comments section.

Images via Pixabay

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