Digital law in Russia
When digital financial assets appeared in Russia, the Central Bank and the Ministry of Finance defined them as highly risky money surrogate without legal protection and proposed to ban them in Russia.
However, such position did not significantly affect the development of digital assets in Russia, and this development was reflected in the laws “On digital rights”, which was adopted by the Parliament on March 12, 2019, and “On digital financial assets”, which is being currently considered by the Parliament.
The relevant laws establish following basic concepts and provisions:
Digital law. It means that owner’s rights for material objects of civil rights (things, results of works, services) can be certified by a digital code (as a rule, by a password) or other electronic data. The draft law also changes the rules of the Civil Code on the form of contracts in order to facilitate transactions with digital rights. Now, for expression of the will to enter into contract, the party may just press “OK” button under the description of contract’s terms.
Sphere of “self-executable” contracts – “smart contracts” will be regulated. Smart contracts are not independent contracts, they are only a condition on automatic execution of any contract, e.g. when client instructs bank to write off utility services payments as an “auto payment”. In this regard, the Civil Code is added with the rule, that under certain circumstances the contract may be performed by its parties through the use of information technologies.
The most problematic issue remains the settlement of digital financial assets, cryptocurrency and tokens, whether they are means of payment, property, currency or securities.
The relevant law cannot be adopted by the Parliament for a long time. At the same time, the judicial practice solving the question whether digital assets belong to a legitimate type of property has begun to take shape.
The Decision of the Ninth Arbitration Court of Appeal of May 15, 2018 No. 09AP-16416/2018 in case No. А40-124668 / 2017 can be considered especially noticeable in this regard.
In the process of private bankruptcy, the arbitration manager found out property in the form of bitcoins on the debtor’s cryptocurrency wallet. The arbitration manager applied to the court in order to include bitcoins into bankruptcy estate and to oblige the debtor to transfer crypto-wallet’s password to the manager.
Court of first instance refused to include cryptocurrency into bankruptcy estate, since it is not legally regulated in Russia, thus it cannot be included into bankruptcy estate.
However, the Court of Appeal overturned decision of the lower court. The court pointed out that Civil Code of the Russian Federation does not contain an exhaustive list of objects of civil rights and recognized cryptocurrency as a kind of “other property” and included it into bankruptcy estate.
In connection with the above, it is worth noting that judicial practice that recognizes digital financial assets and cryptocurrency as a legitimate type of property, begins to take shape in Russia. We consider that legislative authorities will follow a similar course when adopting relevant laws.