Russia has been trying to pass cryptocurrency legislation since the beginning of January 2018, with no success as of yet. The government's main bill, "On Digital Technologies," which was supposed to be passed by July 1 – according to the wishes of President Vladimir Putin – will probably be pushed back until an October Duma session.
According to Artem Tolkachev, the self-proclaimed "first" lawyer in the Commonwealth of Independent States (CIS) to begin working with Bitcoin (BTC) and blockchain startups, the reason the crypto bills did not do it on the July agenda was " because of the complexity of the subject and lack of consensus over the state authorities about how and what they should regulate. "
The problems arising within Russia over how to regulate cryptocurrencies have taken the form of conflict between the Russian Central Bank and more conservative stance and the Ministry of Economic Development
Tolkachev, who has been a chairman of the Russian Blockchain.community since 2016 and founded the Blockchain Lab at Deloitte CIS, said the current version of the crypto and blockchain legislation – which takes its form into three draft bills expectations.
Speaking to Cointelegraph, Tolkachev said that "of course" he is "disappointed by the current version of the regulation," noting that the three bills – "On Digital Technologies," regulation of the central bank on crowdfunding (including Initial Coin Offerings (ICO) ) and amendments to the Russian Civil Code – were prepared independently, which makes their legislation "rather ineffective."
"I spent two years discussing with the central bank, the Ministry of Finance, the Ministry of Economic Development, the general security service and all [the] other guys [about] how we can regulate this stuff. I was trying to sell the idea […] that we can be the country who attracts that kind of business and has the crypto-friendly environment here. Unfortunately, we have what we have. What can I say? That's it. "
Yuri Igorevich Pripachkin, the president of the Russian Association of Cryptocurrency and Blockchain (RACIB), told Cointelegraph that the group was also consulted during the formation of the cryptocurrency bill, but that the bill still contains some unfavorable terms. According to Pripachkin, the Russian cryptocurrency bill in its current form is "behind the ones which were accepted in Belarus, Kazakhstan and many other countries like Singapore, Switzerland."
So what exactly is Russia's digital economy legislation?
At the end of January 2018, the first variant of a Russian Ministry of Finance (MinFin). Crypto and blockchain – related technology – like smart contracts, mining and ICOs. Russia's central bank was also preparing for draft law on crowdfunding.
Tolkachev clarified that the draft laws are "not creating regulation for existing cryptocurrencies and tokens," but are specifically aimed at newly created ICOs:
"According to these cryptocurrencies, especially cryptocurrencies with nothing behind [them], for example, Bitcoin […] will be allowed in Russia. It would not be under the scope of this legislation at all. According to the three bills, we can talk about some kind of asset-based tokens, not about cryptocurrency. "
TASS, which reported to the time that the central bank disagreed with the way transactions between the crypts, rubles and foreign currencies were laid out. However, MinFin noted that this would lead to the creation of conditions for the use of such currency for illegal purposes. "
Pripachkin told Cointelegraph that "MinFin and [the] central bank, they can not find the golden middle, because they have got different opinions in terms of cryptocurrency legislation, so it affects [the] legislative process. "
At the end of February, Russian President Vladimir Putin announced that crypto regulation should become law no later than July 1, 2018. At this time, Russia's central bank still wanted to criminalize ICO token investments, while MinFin was insisting on just regulation, according to local news outlet Parlamentskaya Gazeta. The outlet quoted by Anatoly Aksakov, Chairman of the State Duma Committee on Financial Markets
"The central bank has come out against the legalization of this kind of digital currency inasmuch as citizens invested in instruments without considering possible risks."
Tolkachev noted that the state authorities like the Ministry of Economic Development are "looking forward to doing business for the new business," and thus think the regulation should be changed from the current draft bills. On the other hand, Tolkachev notes that the central bank and the Minister of Finance are the "really conservative guys who do not really want to see cryptocurrencies."
In March of this year, Aksakov submitted the first draft of legislation on cryptocurrencies and ICOs to the State Duma, as well as a draft of the bill "On Alternative Methods of Fundraising (Crowdfunding)."
This draft defines cryptocurrencies and tokens as digital assets, with trading only allowed through authorized cryptocurrency exchanges, and establishes KYC regulations for ICOs. Digital assets are also defined as property, not as a legitimate means of payment in the Russian Federation. This is the version of the Italian version of the Crypto exchange requirements in the United States – i.e., the verification of accounts for anti-money laundering (AML) and counter terrorist financing (CTF) purposes.
Tolkachev noted that the problem was "basic" and "basic". The Russian AML / KYC rules, "as they" may be effective for tracing and monitoring transactions with crypto assets. "
I'll be defined by Russia's central bank rather than the January-suggested 50,000 rubles (about $ 800).
Ria Novosti, with the Bank of Russia, with the Bank of Russia noting that it will be considered permissible to exchange rubles, foreign currencies or property for tokens issued by Russian ICOs, while it will not be allowed to use cryptocurrencies due to the possibility of "questionable transactions."
Also in March, Igor Sudets, a member of the Duma's panel on the digital economy and blockchain, said to be interested in Russian ICOs, according to Forklog:
"I very much hope that [ICO investment specifications] will be substantially finalized for the second reading. Because otherwise, I do not want to conduct ICOs in Russian jurisdiction, since the main goal – to raise money – will be unattainable. "
In April, a crypto bill added that the exchange of crypto for more than 600,000 rubles (about $ 9,500) or its foreign equivalent would fall under mandatory currency exchange regulation.
Pripachkin said that RACIB is currently working on the Duma, and hopes that the Russian officials will take the changes into consideration:
"For now, we're working on some kind of tips, we really hope that we are going to hear […] legal bodies should really understand that if they are going to accept the law which is not in the affected of this industry.
He noted that in Pripachkins' opinion:
"None of the foreign investors will come, and what is more – the local industries could leave the country."
The problems of the mechanism of ICOs, nor of the crypto exchanging licensing, "but I do not know what is it?" and VAT purposes.
Where the crypto bill is now
The most recent version of the bill was approved by the State Duma in its first reading on May 22 in an almost unanimous vote – 410 for and one against.
However, on Sept. 19, Russian news outlet Vedomosti reported on an updated version of the bill, which is no longer contains a definition for "cryptocurrency," and where it is referred to as the "release of tokens to attract investment in capital." bill, mining was the extraction of cryptocurrencies.
The bill does not make digital currencies a legitimate means of payment. Instead, the central bank will create separate guidelines for these currencies to be used as payment in "controlled quantities." The bill also makes a digital confirmation by a user in a smart contract legally equivalent to their written consent.
Crypto through peer-to-peer (p2p) transactions in a "so-called 'gray zone." a comment with Vedomosti, Tolkachev underlines that the draft law does not regulate transactions with cryptocurrencies. Federal Law Bank of America (FSL) 115-FZ (AML and CTF) or they will lose their license.
Pripachkin told Cointelegraph that the "Russian crypto industry and crypto economy is headed [down] the best path […] It's not a problem for us in Russia. But, of course, we would love to have the first [legislative norms] in the world. "
Dmitry Peskov, a special representative of the Russian president, said that Russia was not ready for the circulation and issuance of cryptocurrencies, as it "contradicts the basic functions of government." Peskov notes that the best way forward to develop the cryptocurrency sphere legally in the country is to create a regulatory sandbox to analyze the different aspects of the crypto industry.
To this end, the Central Bank of Russia also announced on Sept. 11 the successful test of an ICO trial with Sberbank and the National Settlement Depository.
More recently, on Sept. 15, a lobby group of the Russian Union of Industrialists and Entrepreneurs (RSPP) announced that they were also working on an alternative crypto regulation bill in order to clarify the supposed contradictions in the existing bill " Russian businessmen, including two of the richest businessmen in the country: Vladimir Potanin, of the nickel and palladium mining and smelting company Nornickel, and Viktor Vekselberg, head of the Russian innovation fund Skolkovo.
Elina Sidorenko, vice president of RSPP, explains that the new version of the alternative bill will divide digital assets into three groups: tokens, which will be equivalent to securities, cryptocurrencies, and digital signs. 'Sidorenko, who did not clarify what "digital 'signs'" entailed, noted:
"Cryptocurrencies will have a special status, which will be enforced on the basis of the laws and regulations that will be issued by the Russian Central Bank. The central bank will issue licenses for exchange operations. In this regard, the status of crypto owners will be notably facilitated in comparison to securities owners. "
If approved by members of the RSPP, the bill can then be discussed with Russian officials in October.
In mid-September, cryptocurrency exchange Huobi joined Russia's VEB Innovation Fund to share notes on crypto regulation and help create "legal basis that could compete with current promising jurisdictions."
Putin and crypto
Although President Putin himself instigated the now-passed deadline for cryptocurrency regulation, the country's leader has still not made any clear, definitive statements about the future of cryptocurrency in Russia.
However, cryptocurrency was mentioned during President Putin's most recent Q & A "Direct Line" with the public, where he spoke negatively – albeit vaguely – about cryptocurrencies and their use cases, but not in any other countries.
Tolkchev believes that the reason Putin chose to speak about crypto in "Direct Line" is the lack of consensus between the regulator and the state authorities,
"That's why if something answers, in some way, it would be something like a direct order to the regulators and the state authorities. I think he just does not want to do it right now. "
Pripachkin added that "Putin was just repeating the position of the central bank", and that RACIB in their proposed amendments to the crypto bill is "working on explanations [on] why they're thinking somehow in the wrong way […] [and] trying to clarify the fears of the central bank. "
The future of crypto in Russia
Cryptocurrency has become a topic worldwide after Venezuela, a country under international sanctions, created its oil-backed government cryptocurrency, the Petro, earlier this year.
In January, Sergei Glazyev, economic adviser to President Putin, said that a Russian government-created "CryptoRuble" would be able to alleviate some economic pressure caused by Western sanctions.
However, Tolkachev does not think that Russia will be looking for cryptocurrencies to avoid sanctions anytime soon, especially as the CryptoRuble is "still nothing but a rumor that has been denied a number of times by various state authorities":
"I think from the [state’s] perspective, it's not a very safe way to use some kind of cryptocurrencies which [the] It is not the only source that you are dealing with […] I understand the current agenda, it's not on the list, we can not use crypto to beat the sanctions. "
On the other hand, Pripachkin was sure that the CryptoRuble project will eventually be implemented:
"This project will be created. Sergey Glazyev is highly advanced in economics, and he understands what he is talking about. "
But Tolkachev does not think that Russia will continue to see the cryptocurrencies as something to the control of the past 10 years:
"Russia and the Russian mentality of the last 10 years was about competing with the [rest of the] world and building something of our own. And the Russian government would like to control the internet, over […] cryptocurrencies […] For such a kind of situation where a lot of people are involved, the government would like to be a little bit more pressure than other countries because of the paradigm in which we are living. "