Regulation of cryptocurrencies in Russia: coming soon

Jul, 05 2018

At the end of January Central Bank of Russia and RF Ministry of Finance prepared 2 draft laws related to cryptocurrency regulation. As a result of discussions and improvements, on March 20th deputies introduced a draft law «On the digital financial assets», which is aimed at regulation of cryptocurrency issues. This draft law has been adopted in 1st reading on May 22. We would like to give you a short review of the main provisions.

Digital financial asset – property in digital form created by the use of encryption (cryptographic) tools.

Digital financial assets are divided into two types: cryptocurrency and tokens. Cryptocurrency is defined as a financial asset which is created and kept in special register by the participants of such register. Token unlike cryptocurrency is a financial asset which is issued by companies. It is aimed at fund raising and kept in their register.

We would like to notice that cryptocurrency in draft law is defined as property (i.e. it will be deemed as goods). Besides, cryptocurrency (and any other digital financial asset) cannot be recognized as the legal payment instrument in Russia.

Under mining shall be understood activity referred to creation of cryptocurrency and/or validation aimed at receiving of reward in the form of cryptocurrency. Mining is recognized as entrepreneurial activity in case person who performs mining exceeds limits for energy usage (established by the Government of the Russian Federation) within 3 consecutive months.

Draft law also provides definition of smart-contract – it is a contract in digital form which performance is carried out by transactions made automatically in distributed register in a certain order and in the event of certain circumstances. This contract allows to buy or sell any property automatically upon the agreed conditions occurs. Protection of the contracting parties’ rights will be regulated similar to contract concluded in digital form.

Draft law establishes special procedure for cryptocurrency exchange on the territory of Russian Federation. This procedure as well as the types of deals being subject to it will be defined together by Bank of Russia and Russian Government.

In addition to the draft law it is also necessary to pay attention at information letter issued by Russian Ministry of Finance. According to the letter it is necessary to pay taxes for operations with cryptocurrencies notwithstanding absence of legal regulation. Taxes shall be calculated as difference between total income gained from the operations with cryptocurrencies and documented expenses.

In conclusion, we would like to mention, that according to the latest research the total amount of investments made by Russian tax residents in cryptocurrencies is $ 7,5-14 billions.