The law “On Digital Currency.” What is important for Russian users to know
Summary of the main provisions of the new draft law and expert comments with an assessment of the possible advantages and disadvantages of market regulation
25.02.2022 - 09:45
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7 min
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On February 18, 2022, the Ministry of Finance sent a draft federal law “On Digital Currency” to the Russian Government. In it, the agency establishes the rules for the turnover of cryptocurrencies and other digital assets in the country. If passed, the law “On Digital Currency” will come into force on January 1, 2023.
The editors of Getblock Magazine have read the document and prepared a brief summary of the main provisions for you.
Definition of cryptocurrency
As expected, cryptocurrencies will not be recognized as legal tender. The ban on accepting assets as payment affects both individuals and legal entities. Instead, the authorities will equate digital currencies with property and will consider this type of asset as an investment instrument.
Requirements for stock exchanges and exchangers
To operate in Russia, all foreign exchanges will be required to register and obtain a license from the regulator. The license will be issued indefinitely and may be revoked if violations are detected. Users will be able to conduct transactions with cryptocurrencies for rubles only through licensed operators.
All information about transactions with cryptocurrencies will be conducted through the “Transparent Blockchain” system of Rosfinmonitoring. Authorities will be able to control these transactions in the same way as it happens now with transactions with non-cash rubles or currency on bank accounts.
A special register of operators will be created to monitor Russian companies. Market participants will be obliged to inform clients about the presence of high risks associated with investments in cryptocurrencies. In addition, there will be a separation of own funds and user funds in the information systems of exchanges. The latter will not be subject to recovery of possible exchange debts.
The bill also establishes the requirements for the minimum amount of own funds. For the exchange, this figure will be not less than 100 million rubles and for the exchanger - not less than 50 million rubles.
Requirements for users
All participants who want to buy or sell cryptocurrency will be required to undergo a KYC procedure. A bank account must be set up to make deposits and withdrawals. At the same time, KYC will be conducted twice: both at the operator level when accepting the service, and by banks when opening an account.
For cryptocurrency transactions, users will use certified electronic wallets, the address of which corresponds to the electronic signature key.
Before buying a cryptocurrency, users will be required to take an online test, the results of which will set the following limits on the maximum amount of investments:
- up to 600 000 rubles for those who passed the test;
- up to 50 000 rubles for those who failed the test.
However, qualified investors and legal entities will not be limited in their investments in cryptocurrency.
About mining
The law defines the concept of the mining as an activity aimed at obtaining cryptocurrency. At the same time, miners will be required to notify the tax service about receiving cryptocurrencies. The bill allows individuals to mine cryptocurrency without registering as an individual entrepreneur, but in respect of this category of citizens will set limits on energy consumption.
Regulator
The authority to regulate the market will be given to a certain agency, the document does not specify which one. The regulator's area of responsibility will include:
- Issuance and cancellation of licenses.
- Development of requirements for operators and monitoring their implementation.
- Creating a list of digital currencies allowed for transactions.
- Conducting inspections of digital currency operators.
- Stop trading on exchanges when violations are detected.
Liability
Both individuals and legal entities will be required to report receipt of cryptocurrency, transactions with digital assets, and wallet balances if the sum of transactions exceeds 600 000 rubles in a calendar year. The fine for this offense will be 40% of the sum.
In addition, the bill introduces criminal liability and provides for a penalty of up to three years in prison if the owners of cryptocurrencies, at least twice in three years, failed to provide the tax service a report on transactions with digital currencies worth more than 45 million rubles.
Comments from experts
We asked representatives of the crypto industry, as well as practicing lawyers, to share their opinions on the new bill.
Maria Stankevich, Chief Business Development Officer at EXMO
Frankly, for me, the text of the Concept for the legislative regulation of the circulation of digital currencies in the Russian Federation was a great surprise, because it is good! Yes, there is something to work on, but after the DFA Law and recent statements of the Central Bank, I think many experts had the opinion that understanding the fact that cryptocurrency is “on top” is not enough. It turned out that this was not the case at all.
Customer identification, transaction monitoring, division into qualified and unqualified investors and market oversight are fine. All this is already in place in Switzerland, the UK, Gibraltar, and other advanced cryptocurrency regulatory states.
From the criticism, I will note the following. I don't quite understand why all information about cryptocurrency transactions should pass through the state system “Transparent Blockchain” of Rosfinmonitoring. When there are much more advanced and world-known Crystal Blockchain, Ciphertrace, and Chainalysis systems, which store a huge amount of data and are connected to all exchanges that follow AML and KYC rules.
Also, I can't help but mention the criminal penalties for not declaring income. But here I am not at all surprised, because in Russia the punishment often does not correspond to the severity of the crimes.
Of strange things, I'll note the decision to entrust the preparation of a bill on the circulation of a new financial instrument in Russia to the Bank of Russia. As you remember, the Central Bank is against the legalization of cryptocurrencies.
Maria Stankevich, Chief Business Development Officer at EXMO
Andrey Tugarin, CEO of GMT Legal
- The Project only addresses the issue of the purchase/sale of digital currency (DC). It still does not regulate the transactions in which the DC gets to the wallet on other grounds.
- The Project does not solve the problem of organizing the issue of DC. It is not clear who and under what circumstances can be the issuer of digital currency.
- The articles and the content of the Draft are based on what used to be, and not on new modern approaches. Obviously, it is based on the regulation of stock exchanges and adds a very minor focus on blockchain technology and the cryptocurrency industry.
- In contrast to the Concept, the Project lacks such a subject as the operator of the exchange system, which was supposed to be only banks. Instead, the subjects of this market, according to the Project, can be any business entities: LLC and JSC (public and non-public).
- The definition of DC is given. However, it consists of a part of the definition given in article 1 of the FL on DFA. Moreover, there is an assumption that the definition is given incorrectly and instead of the phrase “which are accepted as a means of payment” it should be “which are offered as a means of payment.” The DF is recognized as property for all purposes. NOTE. Previously, in the FL on DFA, it was recognized as property only for the purposes of 4 separate laws.
- The draft singles out 2 new subjects:
- digital trading platform operator (cryptocurrency exchange);
- the operator of digital currency exchange (cryptocurrency exchangers).
Crypto exchanges will have to open nominal accounts in a credit institution of the Russian Federation. This means that crypto exchanges are allowed to circulate live fiat currency, not its digital counterpart. We’ll see.
- Finally, the means of fulfillment of the obligation to transfer the VC are being established. This is a positive point, contributing to the resolution of disputes that arise and which makes it possible to use evidence in court.
- Limits are set on the purchase of DC and the division into:
An unqualified investor without a test - if not passed the test, when reapplying, they must declare acceptance of all risks associated with the purchase and the limit in the amount of the purchase - 50 000 rubles. OR in the amount of one lot of the DC.
An unqualified investor with a test - there is no limit in the purchase amount, but the limit for the year is no more than 600 000 rubles.
Qualified investors - there are no limits.
Purchase of DC will be possible only through operators. Other ways are prohibited.
Purchase of a DC will be possible only through a bank account in the Russian Federation.
- Only brokers will be able to make transactions in digital currency on behalf of third parties.
- Attention will be paid to mining. Miners will be required to report to the Federal Tax Service about the fact and the results of mining DC. Individuals engaged in mining are NOT required to register as individual entrepreneurs.
Andrey Tugarin, CEO of GMT Legal
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