With all the transparency, speed and reliability, the crypto market still causes a lot of skepticism among businessmen, experts say
Legal entities and individual entrepreneurs (IPs) may be allowed to use cryptocurrency as a means of payment for foreign trade activities. Such amendments are contained in the version of the bill “On Digital Currencies” finalized by the Ministry of Finance, which affects the regulation of the crypto market. The document (available from Vedomosti) was presented at the discussion platform of United Russia on the development of blockchain technologies and the regulation of digital financial assets on May 27.
The bill of the Ministry of Finance still prohibits the use of cryptocurrencies as a means of payment in Russia, but allows transactions with buying and selling as an investment through Russian banks and only for those clients who have been identified. It will be carried out both by operators (crypto exchanges) when accepting clients for service, and by banks when opening a bank account.
The new version of the document, however, makes a reservation: using the “identifier provided by the operator of the digital trading platform”, legal entities and individual entrepreneurs will be able to pay for their foreign trade contracts, in particular, pay for goods, work, services, intellectual activity, etc.
The current version of the document of the Ministry of Finance takes into account the comments of the Ministry of Economic Development, the Ministry of Internal Affairs, the Ministry of Digital Development, the Federal Tax Service, Rosfinmonitoring and the Center for National Projects of the Analytical Center under the Government. At the same time, the bill was not coordinated with the Central Bank due to its negative position on this legislative initiative at the concept development stage, according to a letter from Deputy Prime Minister Dmitry Chernyshenko addressed to Prime Minister Mikhail Mishustin.
The position of the Bank of Russia regarding the legalization of cryptocurrencies is quite radical: it opposes the issuance of cryptocurrencies (mining), circulation and exchange. According to the Central Bank, cryptocurrency is used mainly to avoid anti-money laundering requirements or to finance terrorism. It also bears the risks of a weakening of the ruble exchange rate, a decrease in the volume of financing for the real sector of the economy, a complete loss of private investors’ investments in cryptocurrencies, etc.
In mid-February, the regulator developed its own bills to regulate this market, sending them to the Ministry of Finance. The Central Bank proposes to ban the issuance (mining), circulation and possession of cryptocurrency in Russia, and for violation of the bans – a fine of up to 1 million rubles. Banks, according to the draft of the Central Bank, will also be prohibited from owning cryptocurrency. The bill actually prohibited advertising any information about cryptocurrency.
Anton Gorelkin, Deputy Chairman of the State Duma Committee on Information Policy, during a discussion on May 27, noted that United Russia supports the Finance Ministry’s bill, but “notes the need for coordination with the Central Bank in order to reach optimal regulation taking into account the interests of our citizens.”
Idea flaws
The use of cryptocurrencies for settlements under international contracts meets the challenges of the current geopolitical situation, Gorelkin said on Friday. This position was supported by the head of the department for the development of the digital economy of the Ministry of Economic Development Anatoly Dyubanov. On the United Russia discussion platform, which was monitored by Vedomosti, he proposed not to postpone the introduction of this rule until the new year, but to synchronize it with the adoption of the bill.
It is theoretically possible to use cryptocurrency in international settlements, a representative of the Central Bank told Vedomosti, but the potential for such settlements is rather limited. Cryptocurrencies handle far fewer payments than traditional payment systems, he explained. Therefore, when Russian legal entities and individual entrepreneurs switch to cryptocurrency as part of their foreign trade activities, large regular payments can be detected and blocked by foreign regulators.
Moreover, the representative of the regulator continues, the main cryptocurrency platforms are tightening the “know your client” (KYC) procedures in relation to Russian citizens. Some participants in the crypto-currency market have begun to impose restrictions on working with Russian residents (and not only sanctions), up to the freezing of their funds, said a representative of the regulator. On April 21, the largest crypto exchange Binance, referring to the next package of sanctions, announced the restriction of access to trading and depositing funds to the account for users from Russia. The restrictions will affect those who own crypto assets worth more than 10,000 euros. The only available service for such clients is the withdrawal of funds.
The tightening of the KYC procedure for Russian citizens on foreign crypto platforms was also noted by the senior partner and head of the international legal direction of the law firm K&P.Law Alexander Kukuev. In his opinion, with the increase in court cases to hold crypto-platforms accountable for the transfer of Russian money, KYC procedures for Russian passports will become tougher. In addition, many cryptocurrency platforms may refuse due to the risks of falling under secondary US sanctions.
It does not look like an illusory risk when a Russian crypto exchanger turns out to be the owner of a mass of cryptocurrency that he will not be able to sell further, notes Lidings adviser Dmitry Kirillov.
Executive Director of the Russian Association of the Cryptoindustry and Blockchain (RACIB) Alexander Brazhnikov agrees that the sanctions create some difficulties for paying international treaties with cryptocurrencies and this proposal requires time for a detailed assessment. In addition, he is not sure that the Central Bank is ready to include digital currencies in its list of settlement instruments. But the problem, according to Brazhnikov, now lies in the field of understanding and accepting the possibilities of fundamentally new financial technologies, in the ability and willingness to operate decentralized financial assets. “And so far, not everything is going smoothly for us,” he admitted.
It is at least premature to build a foreign trade strategy on this proposal, Mikhail Uspensky, deputy chairman of the digital commission of the Moscow branch of the Russian Bar Association, believes. According to him, classic payment tokens such as bitcoin are rarely used in settlements due to high volatility and the parties prefer settlements using dollar stablecoins, but they do not fall under the definition of digital currencies under the current or planned de jure regulation. “But the key problem is that not all foreign suppliers are ready for such calculations. With all the transparency, speed and reliability, the cryptosphere still causes a great deal of skepticism among businessmen,” Uspensky sums up.
There are pluses
Despite the sanctions of the EU and the US, as well as the tightening of KYC procedures, there are many countries in the world that work according to their own national legislation and Russian businessmen have space to work with cryptocurrencies, Valery Petrov, RAKIB vice president for market regulation, is sure. According to him, the permission for settlements in digital currencies in international treaties will simplify mutual settlements of an investment nature for Russians and reduce the sanctions pressure on the Russian economy.
Among the advantages of paying with cryptocurrencies under foreign trade contracts, there is no need to contact correspondent banks to make a payment, Kukuev believes. Recently, many European banks have been blocking bank transfers from Russia, but these correspondent banks do not use cryptocurrency transfers in their operations, he added.
But while in Russia there is no sufficient legal protection for such transfers, Kukuev recalls: there is no clear legislative regulation, methods of legal protection have not been developed, it is difficult to enforce a decision of a state court or an arbitration institution against a debtor.
What else did the Ministry of Finance add?
The latest version of the draft law of the Ministry of Finance practically does not differ from the April one (Vedomosti has it). But it has some significant additions. Characteristics appear, as well as conditions for attributing the place of circulation of digital currencies precisely to the territory of Russia. A ban is introduced on advertising crypto-exchanges and crypto-exchangers that have not received a license from the authorized body (it will be determined by the government), and the duty of search engines is not to issue these illegal crypto-exchanges and exchangers at the request of citizens.
The Ministry of Finance also proposes to introduce an obligation for licensed crypto-exchanges and crypto-exchangers to store in Russia information about the owners of digital currency, transactions with it, etc. for three years in order to be able to cooperate with law enforcement agencies, passing them the necessary information upon request. This innovation should stop the risk previously described by the Central Bank that cryptocurrencies are used mainly to avoid anti-money laundering requirements or to finance terrorism.
There was a requirement to indicate in the register of owners of cryptocurrencies that “the address-identifier of the specified person is associated with a digital currency acquired as a result of digital mining.” At the same time, this information should be entered into the registry by the operator himself, and not by the buyer of the cryptocurrency, as was the case in earlier versions of the bill.
In addition to innovations, some norms have been removed from the current version of the bill. For example, the mention of possible volumes of investments in digital currencies for legal entities and professional purchasers of digital currencies has disappeared. The article devoted to mining and defining it as an activity aimed at obtaining cryptocurrencies has undergone a strong reduction, including the requirement to be included in a special register of legal entities and individual entrepreneurs engaged in mining. The text of the document also does not include a description of the mechanism for transferring information to the tax authorities for the exercise of their control and supervisory functions.
