Russian Government Set to Launch Bill that Calls Bitcoin & Crypto a Currency Analogue
The Russian cabinet has reportedly thrashed out an agreement with the Central Bank on the matter of cryptoassets. Widespread media reports from the likes of Kommersant, as well as Cnet claimed that the agreement would see a draft law rolled out by February 18.
Although the draft document will reportedly see a slew of tight restrictions imposed on crypto ownership and circulation – with crypto exchanges brought under a strict regulatory umbrella – the document is set to define crypto as a type of “currency analog,” instead of a “digital financial asset.”
"Such a status would actually impose quite strict regulations on the Russian crypto industry. Additionally, the reports on the proposed legislation provide no clarity on such important issues as tax rates on transactions, what would constitute a taxable event, and whether profits from crypto trading would be taxed differently," Anto Paroian, Chief Operating Officer at digital assets investment fund ARK36, said in an emailed comment.
According to him, for the time being, the safest option for Russian crypto investors may be to invest through an intermediary rather than by obtaining direct exposure to any individual digital asset.
In either case, although much of the international crypto community has been enthused by the news, there may cause for some degree of caution.
Russian lawmakers have been deadlocked over the issue of crypto regulation for several years, chiefly because many forces in the government – particularly the Ministry of Finance – favor a more relaxed approach to regulation, while the Central Bank has repeatedly called for a blanket crypto ban.
This impasse has left the legal system in limbo, with politicians and judiciary members uncertain how crypto should be defined. Previous legal documents have made reference to crypto as a form of “intangible property” and vague terms like “digital assets” and “digital financial assets” have been used to define coins such as BTC.
Russian politicians and legal experts have agreed that these terms are lacking in clarity, and have urged the government to approve legally binding definitions for terms including “blockchain,” “cryptography,” “crypto mining” – as well as “cryptoassets.” As such, it appears that calling crypto a “currency analog” has more to do with legal-minded semantic gymnastics than any kind of bullish crypto adoption drive.
The cabinet’s agreement with the Central Bank may have been brought about after direct intervention from President Vladimir Putin, who earlier this year made reference to Russia’s crypto-related “resources” (namely a large amount of developers and ample surplus electricity). But Putin’s previous comments on crypto, while sometimes somewhat optimistic, have remained guarded.
And the regulatory framework reportedly agreed by the cabinet and the Central Bank may look eerily familiar for anyone who has studied the path taken by regulators in regions such as Europe and East Asia.
The draft bill will seek to stamp out anonymity in the crypto sector, by forcing crypto exchanges to fully identify their customers and their transactions via the domestic banking system and licensed financial intermediaries.
Individuals seeking to buy or sell crypto will have to “disclose their full names, phone number, passport details, as well as bank account details and email addresses” to banks, the media outlets reported.
If adopted, the bill would also seek to criminalize unreported crypto transactions worth over USD 8,000 and impose punitive fines on any firm or individual who accepts crypto as a form of payment.
Crypto payments were outlawed in what still remains Russia’s only piece of crypto legislation to date, but courts have been powerless to impose a strict form of punishment on anyone caught breaking this law.
The measures would force all crypto exchanges and brokerages to register with a central body – and would force all overseas trading platforms to either obtain operating permits or close down their Russian operations.
The central body in question would comprise representatives of six regulatory bodies, including two ministries, the Central Bank, the Prosecutor General’s Office, and the Federal Tax Service.
"Overall, authorities start to recognize that crypto is becoming such an entrenched part of how people think about and deal with money in the digital age that the political and economic cost of banning it appears to be far greater than the risk involved in allowing it to coexist with the legacy financial systems," Anto Paroian concluded.
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(Updated at 08:12 UTC with additional details. Updated at 14:27 UTC with a new tweet. Updated at 14:47 UTC with comments from Anto Paroian.)