Are Cryptocurrencies Legal in Russia?

3 min, 24 sec READ

Over the past few years, the status of cryptocurrency regulation in the Russian Federation has been controversial. Several different institutions and heads of organizations gave different and often contradicting opinions. On the 25th of May, 2016, the Deputy Chairman of the Central Bank of the Russian Federation, Olga Skorobogatova gave the following statement "We propose to define them as digital goods and apply the legislation with certain clarifications regarding taxes, control, and reporting as a digital product..." In addition, the Minister of Finance, Alexei Moiseyev in an interview with Russia 24 TV channel stated "We propose to define it as a cryptocurrency, but regulate it as property, qualify it as a financial asset and allow only qualified investors to buy and sell them (cryptocurrencies) on the Moscow Stock Exchange in order to protect the rights of buyers and sellers".

Just two years earlier on the 1st of April, 2014, the Russian Ministry of Finance published a legal draft aimed at banning ‘monetary surrogates,’ essentially making cryptocurrencies illegal to be used, issued, sold or bought in Russia. However, the ban was never issued, and the Federal Tax Service (a separate agency within the Ministry of Finance) issued a letter on October 3, 2016, titled "On the measures regarding the exercise of control over the circulation of cryptocurrencies" essentially stating that "the legislation of the Russian Federation does not prohibit Russian citizens and companies from using cryptocurrencies." The letter explained that the law prohibiting the issuance of  "money surrogates" did not clearly define what that term meant, and subsequently it cannot be concluded that cryptocurrencies or virtual currencies are considered “money surrogates” under the law.

What Does the Future Hold?

After many contradictory statements from legislative bodies in Russia, it seems like they finally came up with a definitive plan, and it may surprise cryptocurrency enthusiasts. On October 10, 2017, the President of the Russian Federation, Vladimir Putin, approved a list of five instructions concluded in a meeting “on the use of digital technologies in the financial sector.”

As part of the digital economy of the Russian Federation:

1. The Government of the Russian Federation, in conjunction with the Bank of Russia, shall ensure that changes are made to the legislation of the Russian Federation providing for:

a. Determination of the status of digital technologies used in the financial sphere and their concepts (including such as "technology of distributed registries", "digital letters of credit", "digital mortgage", "cryptocurrency", "token", "smart contract") As of now, the Ruble remains the currency with legal tender in the Russian Federation

b. The establishment of regulations for the organization and implementation of production based on the principles of cryptography (“mining”),  including the registration of economic entities carrying out such activities, and determining the procedure for its taxation

c. Regulation of Initial Coin Offerings, in an analogous manner to the regulation of Initial Public Offerings (placement of securities)

2. The Bank of Russia together with the Government of the Russian Federation submit proposals:

a. On the creation of a special regulatory platform ("sandbox") under the Bank of Russia, for the approbation of innovative financial technologies, products, and services and the establishment of rules for the regulation of the relations between them.

b. On the formation of a single payment area for the member states of the Eurasian Economic Union with the use of new financial technologies, including the technology of distributed registries.

Conclusion

The President of the Russian Federation, Vladimir Putin has stated in many of his interviews that he envisions Russia as a leader in the IT sector in the years to come. He is aware that the country's economy is dependent on oil, gas, and other natural resources which may cause geopolitical problems further down the road. For this exact reason, the Russian Federation is focused on the development of various technologies in the hopes of establishing its presence on the global markets. It seems like Russia has recognized the potential of distributed ledger technology and its planning to capitalize on it in the near future. If their plans to issue the CryptoRuble go through, it will be just the beginning.


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