Russian govt criticizes cryptocurrency bill

Maria Nikolova

Although the Russian government said it formally supports the bill, it outlined numerous problematic aspects in the document that should be corrected before the second reading.

The Russian government has filed its official response to the “Digital Financial Assets” bill submitted by the Finance Ministry in March this year. The bill, which aims to fit cryptocurrencies, tokens, mining and related operations in the Russian legal system, faced a set of objections from the government.

The first remark concerns the so-called smart contracts. According to the government, the bill fails to stipulate how the relations arising from the execution of smart contract obligations will be regulated.

Regarding the “cryptocurrency” definition, the government is displeased that there is no explanation of the difference (if any) between a cryptocurrency and a token. In addition, the government notes the lack of any proposed regulation of the relations arising from cryptocurrency turnover.

The government is not impressed with the definition of “mining” either, as the proposed defintion takes into account mainly electricity consumption, and this criterion is seen as too vague. The bill also does not make it clear whether the activities of providing the equipment for cryptocurrency activities can be treated as mining or not.

Another remark the government makes is related to the restrictions that Russian residents might face, as the bill, in its current version, prevents them from investing in digital financial assets abroad. There are also obstacles for foreign investors who would like to invest in digital financial assets in Russia.

The bill does not propose how to handle the taxation and accounting issues related to cryptocurrency activities in Russia, the government adds. There are also gaps in the bill with regard to any enforcement action against cryptocurrency criminals due to the lack of a specified mechanism for identifying the owners of the digital financial assets and the individuals responsible for the functioning of the the digital financial asset systems.

Although the Russian government said it formally supports the bill, it stressed that the problematic aspects in the document should be corrected before the second reading.

The bill is published in response to orders issued by Russia’s President Vladimir Putin in October last year. Back then, he gave the Central Bank of Russia and the Russian government until July 1, 2018, to change Russian legislation so that it determines the status of DLT, cryptocurrencies, smart-contracts and tokens.

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