will most likely be adopted
Judging by the information of people directly related to the development of Russian cryptocurrency legislation, the authorities are inclined to follow the path of “supervised legalization” of crypto assets .
Recall that in early August, Russian Prime Minister Dmitry Medvedev instructed the Ministry of Finance and the State Duma to adopt a bill on digital financial assets by November 1 of this year.
Earlier, President Putin had already set the deadline for the adoption of regulatory standards – until July 1 of this year – however, the State Duma was not able to adopt regulatory acts before the end of the spring session. Apparently, for this reason, such a deadline was established, because the government, parliament and central bank have been busy with this issue for about five years.
The lack of a legislative framework has led to uncertainties in relations between the state and the cryptocurrency market, especially since over the past five years, legislators, financiers, and officials have made strikingly different statements on cryptocurrencies.
The most radical position is taken by the head of the Bank of Russia Elvira Nabiullina, who actually called cryptocurrencies “money surrogates”. Moreover, the position of Nabiullina has been publicly supported by President Putin several times. However, representatives of other government agencies, as a rule, were not so categorical in their assessments.
So, at the beginning of the year, Prime Minister Medvedev from the rostrum of the Gaidar Forum called for “not to rush to bury cryptocurrencies in connection with the depreciation”. By the way, he turned out to be right – later the course began to grow. The same Putin, although he supported Nabiullina, in 2017 called "not to block unnecessary barriers" (in this area).
At the moment, we have a full-fledged document – a draft of the bill. According to the head of the Duma committee on financial markets, Anatoly Aksakov, the document is almost agreed. Only the status of cryptocurrencies in Russia remains unresolved in it. The government is currently considering three regulatory options:
- unconditional legalization of cryptocurrency circulation in Russia;
- a ban on working in an infrastructure with an open blockchain;
- Legalization of cryptocurrencies and digital money under the supervision of the Bank of Russia.
Theoretically, any of the three options can be implemented, and the first – unconditional legalization – is undoubtedly preferable for the crypto community. Clear advantages in this scenario will be the development of the mining industry and the attraction of large domestic and foreign investments in regions with cheap electricity. However, this scenario completely deprives regulators of leverage.
In addition, critics say, the potential disadvantages of full legalization are wide opportunities for scammers, cybercriminals, drug dealers, pornography makers, corrupt officials, and tax evaders.
Legalization is also fraught with a significant increase in the volume of the shadow economy, which is associated with the high anonymity of most cryptocurrencies. It can be argued that the use of cryptocurrency financial instruments by criminals has nothing to do with legalization and or prohibitions. Terrorists, drug dealers and pornographers can continue to use crypto assets for criminal purposes and in the event of a ban.
The main and insurmountable obstacle to full legalization is the Russian legislation, according to which, the only legal tender in the country is the Russian ruble. Therefore, hoping for an unconditional resolution of the cryptocurrency turnover is most likely not worth it.
The second regulatory scenario is a ban on working with currencies on the open blockchain . Such a ban does not solve the problems with criminalizing the market, since it is possible to legally ban the use of such assets, but in fact it is impossible. For the shadow business, nothing will be changed during the ban, but law-abiding market participants will suffer: miners, investors, and traders.
In addition, the ban on working with the open blockchain will bury potential investments that may benefit many of the northern and north-eastern regions of the Russian Federation. For many enterprises in regions with cheap electricity that have been idle since the collapse of the USSR, the creation of industrial mining zones and mining hotels would be a boon. The ban will deprive them of these opportunities.
The third scenario is supervised legalization. The most logical step seems to be just the legalization of cryptocurrencies under the supervision of the Bank of Russia. The fact that parliamentarians and government officials plan to apply controlled, controlled legalization is hinted at by the information shared with journalists by the head of the State Duma's working group on cryptocurrency risk assessment Elina Sidorenko and the head of the department of planning and coordination of scientific activities of the Krasnodar University of the Ministry of Internal Affairs of Russia, Ph.D. Zarina Khisamova.
According to them, the document preparing for adoption takes into account the global practice of regulating digital assets, that is, it implies supervised legalization.
In a scenario with a controlled cryptocurrency market, the Bank of Russia will play a key role in regulatory matters. In this case, business – mining, trading and investment – can be carried out using legal trading and mining platforms created either by the Bank of Russia itself or with its participation. Thus, the state will become one of the beneficiaries of operations with cryptocurrencies. The advantages of the legal status of cryptocurrencies will be preserved, and the risk of losing control over them will be minimized.
At the same time, it is still unclear how the regulator intends to control blockchain transactions , mining, and also identify users. The main problem will be the creation of control algorithms and their technical implementation. The effectiveness of state regulation of the crypto market will depend on this.
Publication date 08/17/2019
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