Russian officials took some important steps this month towards the creation of a regulatory framework for security tokens. In the past, Russia has been on the fence of how to exactly handle the new technology. This undecidedness hurt the country’s blockchain community and slowed adoption.
Now it appears that lawmakers recognized the importance of staying relevant in the sector. Consequently, officials continue to usher in new laws pertaining to the use and ownership of digital assets. Now, Moscow wants to give its entrepreneurs the opportunity to compete on the global stage.
Legislation in the Works
Russia currently has three main crypto-related bills going into enforcement in the coming months. These bills are part of the “Open Russian Digital Economy” campaign. This campaign is about helping Russian develop alternative sources of revenue and finance through innovation.
Of the three bills set to activate in the coming weeks. Two of the bills fail to mention cryptocurrencies directly. However, the bills do cover crypto activities. The third bill does explicitly name cryptocurrencies.
Unfortunately, officials delayed the third bill three times already. This bill is known as “On Digital Financial Rights.” Many in the country consider this bill to be the most important piece of crypto legislation at this time and for good reason.
The “On Digital Financial Rights” bill finally breaks digital assets down into three categories – Virtual Assets (crypto), Technical (utility), and Digital Financial Assets (security tokens). This legislation is a critical first step to increased adoption. Primarily, it would help build confidence in the crypto economy.
Notably, the bill has seen multiple amendments since its introduction, mainly because of strong support from the local business sector and the Finance Minister. The Chairman of Russia’s Financial Market Committee, Anatoly Aksakov introduced the first two drafts of the bill on March 20, 2019.
A co-sponsored third draft of the legislation went in front of lawmakers on March 26. The bill was filed by the head of the parliamentary Legislation Committee, Pavel Krasheninnikov and the Speaker of Duma, Vyacheslav Volodin. Interestingly, this version of the bill focuses on the use of self-executing contracts, or smart contracts.
Use of smart contracts
Regnum, Russian lawmaker Pavel Krasheninnikov, head of the parliamentary Legislation Committee stated that smart contracts are very similar to reoccurring payments systems currently in place. He believes that this FinTech is essential in the development of the Russian digital economy.
Russia Central Bank Doesn’t Like Bitcoin
The main reason for the postponement of “On Digital Financial Rights” is the fact that Russia’s Central Bank is still opposed to the entire concept of decentralized cryptocurrencies.
Not surprisingly, the central bank doesn’t support any other form of currency, other than the ones it issues personally. At one point, the bank’s deputy governor, Sergei Shevtsov went as far as to call cryptos a “high-tech pyramid scheme.” The statement highlights some of the blockades the Russian cryptocommunity must overcome in order to succeed.
On Digital Rights
On October 1, the second piece of legislation – “On Digital Rights” entered into force. This is the first piece of legislation to enter service. It’s similar in nature to the “On Digital Financial Rights” legislation but differs in many key ways. Mainly, the legislation doesn’t use the word “cryptocurrencies.”
The bill established basic legal definitions in the sector and the status of each. For example, Digital Rights is now a legally recognized term in the country.
Amend the Civil Code
The new law amends the Russian civil code. The addition now states that the use of information technology is legal for the fulfillment of obligations in certain circumstances. Basically, self-executing contracts are legally binding moving forward.
ICO Laws on the Way
In January, the third crypto-related bill will go into enforcement. This bill deals exclusively with crowdfunding campaigns such as security token offerings (STO). The law is called the “On Attracting Investment Using Investment Platforms” and its ramifications are far-reaching.
Russian President Vladimir Putin signed the bill on August 2019. The new law places investor protections, as well as, restrictions in the ICO and STO sectors.
For example, unqualified investors can only invest up to 600,000 rubles ($9000) per person. This law is meant to protect uneducated investors from taking large losses. Unfortunately, it can also limit normal investors from maximizes their ROI.
The legislation will also restrict what firms can host crowdfunding events. Not surprisingly, only parties registered with the country’s central bank can engage in crowdfunding activities at this time. Basically, any STOs in Russian need the blessing of the central bank to proceed.
Not Easy Being a Russian Crypto Investor
This law showcases Russia’s efforts to allow only the elite to utilize the blockchain sector, while at the same time, making it nearly impossible for the average person to do so.
This pattern of neglect toward the civilian investor isn’t anything new. Back in 2017, Russia hinted towards banning crypto at the same time the central bank announced plans to issue its own native cryptocurrency in the coming 2 years – the cryptoruble.
Russian Association of Blockchain and Cryptocurrency
Despite the country’s history of cloudy crypto legislation, Russia continues to see further blockchain expansion. The country already has numerous firms working together to help add transparency to the sector – the Russian Association of Blockchain and Cryptocurrency.
This group provides investors with a rating system to better gauge the validity of an ICO or STO. The firm seeks to create an international standard to rate crowdfunding campaigns. In this manner, investors can accurately assess the risks associated with these investments more consistently.
Sanctions Result in Change
Russian officials took the monumental steps to further the local blockchain sector after dealing with a host of crushing sanctions imposed by the US. US lawmakers insisted on the sanctions for what they deemed as election meddling in the 2016 presidential elections.
Since the start of the sanctions, Russian President Vladimir Putin has criticized the US’s decision. He stated that the US’s move weaponized the dollar. Consequently, this strategy makes it difficult for competing countries to keep faith in the currency. Essentially, the move forced Russia to consider alternatives.
Russia Goes Crypto
Russia is now ready to turn towards blockchain solutions. The country possesses the network and technical skills to be a dominating force in the crypto sphere. Considering that the country is set to launch its own native cryptocurrency in the coming year, it makes sense that lawmakers start to promote a more blockchain-friendly business environment.