Industry News New Pressures in Russia on the Local Cryptocurrency Ecosystem

New Pressures in Russia on the Local Cryptocurrency Ecosystem

June 2, 2020

There is no doubt that the Russian Federation is not the biggest fan, legislatively speaking, of cryptocurrencies. It’s State Duma has previously shown contempt not just for bitcoin and its BTC token, but also for ethereum, ripple and any other crypt alternative that appeared there in any context.

In the case of the highest executive body of the land, whatever is not ruble, which is the state-issued fiat currency, the Russian government is rarely supportive. Now, the government provided a new draft law that apparently put the pressure on the same domain yet once again. So far, the country has repeatedly put out different messages related to cryptocurrencies, but in a hazy way, it reminds a strong critic of this industry.

The same applies to the recent draft law called On Digital Financial Asset. Last Monday, it was put up for public comment, along with a range of documents that hope to change the regulation around cryptocurrency in Russia. The draft includes rules when and how (and for whom) the breaking of any rules comes with legal penalties. Yet, oddly enough, the law appears to include a structure and wording that will not impact the way ordinary Russians use cryptocurrencies, including bitcoin, in their everyday lives.

Russian Central Bank

The law, according to the experts, represents something that is generally in line with the narrative both the Central Bank and the Kremlin had in regards to the privately issued cryptocurrencies. It does, however, provide a direct prohibition of the circulation of all digital currencies, but also any advertising or mining of these financial entities. Yet, even now, cryptocurrencies reside completely in a gray zone in the wider Russia and even its former USSR sphere of influence.

That is why anyone who owns one or two BTC tokens as a regular citizen is not in any kind of risk from the new legislative measures. But, the same does not apply to business entities in this field. Local entrepreneurs are certain that wallets hosted on Russian sites and cryptocurrency exchanges might be under threat very soon. This is particularly going to impact, if the law comes through and gets enforced, any digital wallet or similar service located on the .ru domains.

Owning Crypto in Russia

The experts are underlying that the law does not stipulate that the Russian citizens cannot own any digital financial assets through a legal framework. So far, the financial authorities have not included any rules for the including of cryptocurrencies as a security-type of asset. However, the broader Russian crypto market – which is not small by any measure, just like its esports field and many other digital-only domains – is still waiting for the same decision. Yet, there has been a lot of back and forth on that subject.

This is seen in the fact that there appear to be different factions in any Russian agency that is responsible for regulating cryptocurrencies. In many ways, these officials have been in a state of continuous bickering and arguing about digital currencies since the start of 2018. Now, some members of the Duma are saying that the same crypto law – even if it passes – will not take effect before the summer months.

There was also an explanation regarding the way people bought and sold cryptocurrencies – the process is legal in the eyes of the state, but it has to include payment of taxes. Once they do, they will also attain legal protection because the same crypto will be considered property. However, there is a catch. If they do not declare it, the same funds will be open for seizure. But, the idea is that in both cases, even if the funds are seized, there will be no additional legal penalties for owning cryptocurrencies.

Entrepreneurial Worry

Naturally, even with all those elements that should protect ordinary users, there is little doubt that the cryptocurrency-tied businesses and startups will be in deep trouble once the law becomes introduced. Some entrepreneurs expected this so they went to the trouble of registering their ventures in the EU or other nations outside of Russia. Telegram is one of the most famous examples of owners being very worried about the legal ramifications of working in a country like the Russian Federation.

All of them are ready to move their operations outside of the country on a drop of a dime. However, things like the labor costs and accessibility of an educated workforce, as well as the fact that many entrepreneurs want to stay in their home country means that moving operations are still not taking place. Instead, the community is trying to decipher the law and what it might entail for them.

Blockchain Development

The more optimistic voices are focusing on the fact that the law appears to be regulating cryptocurrencies, not blockchain development. That would mean that anyone and any company active in the blockchain development domain would have nothing to fear, as long as they are not working with bitcoin BTC tokens or anything similar. So, as long as a venture is not trying to work with existing digital currencies or make any of their own on Russian territory, they should be completely fine.

This is likely a big relief for many businesses that are active in the wider Russian IT community and which make up the majority of the blockchain ventures and startups. It also shows that the Russian Duma is able to disseminate between cryptocurrency blockchain application and essential blockchain tech itself. Yet, when all is said and done, there is also a chance that this is just one more hyped up process that will lead nowhere.

In the last three years, Russia had a share of these, and all of them fit perfectly into the general modus operandi of the broader modern Russian state. Lastly, even with the regulation in place, the community of cryptocurrency users is more than aware of what kind of society they live in. That is why the actual impact any law might have, both for individuals and companies, seems minuscule.

Source: Forbes