Russian government has announced it will support the draft of the digital financial assets bill drafted by the Finance Ministry earlier this year and introduced in the Parliament in March, provided the bill would be amended as per the government’s recommendations.
In its review of the draft of the bill the government noted that while the bill defines digital assets, including crypto currencies, it does not provide sufficient regulation in the sphere of cryptocurrency turnover, which can affect the law enforcement practice.
The government questions the loose language used in the Article 2 of the draft bill to describe mining, token and crypto currencies.
For example, it noted, activities related to cryptocurrency mining may not be directly related to transaction registry, but can include providing electricity or technical capacities, including physical space where the mining equipment is located. These kinds of activities cannot be attributed to mining, the government argues, hence the definition of mining used in the bill should be clarified.
The government also suggested to expand the list of criteria on the basis of which an entity can be recognized as engaged in mining, since the energy consumption indicator used presently does not provide an unambiguous basis for such a conclusion.
With regards to definition of token and cryptocurrency, the government review report notes, the language used in the current form of the bill neither allows understanding the relationship between the concepts of token and cryptocurrency nor it helps to determine the way primary emission is regulated.
The government also questions the limits imposed on the residents of Russian Federations by the draft bill. According to the article 3 of the bill, they are not allowed to invest in digital financial assets in foreign jurisdiction. Another clause in the draft bill holds that digital wallets with crypto exchange can be opened upon undergoing certain identification procedures (as per the state law "On combating legalization (laundering) of funds earned by criminal means and financing of terrorism").
Such requirements, according to the government, limit the access to the market for foreign investors as well as restrict token trade for Russian investors and coin issuers.
The government therefore proposed to amend the bill in order to allow digital financial assets exchange operators to use simplified remote identification. It also suggested regulating the right of foreign investors to transfer coins to the issuer's wallet in exchange for the tokens of Russian issuers arguing that such measure could increase the investment attractiveness of Russian coins.
Interestingly, the government suggested imposing a mandatory control over cryptocurrency exchange transactions exceeding 600 000 rubles (US$9,669) or the equivalent in the foreign currency. "However, the absence of a mechanism to identify the owners of digital financial assets and persons operating digital financial asset systems will not allow (the regulators) to prevent criminalisation of this sphere or use of digital assets for illegal purposes," the government report noted.
Among other recommendations, the government suggested that tax legislation as well as accounting standards of the Russian Federation should be amended as the existing legislation does not regulate the taxation of digital assets or transactions involving crypto currencies.
By Jade Olafson