The desire for total control: how the regulation of cryptocurrencies is changing in Russia

The past year was supposed to be the year when the State Duma will adopt strict laws on the regulation of cryptocurrencies — this is what high-ranking parliamentarians promised. But that did not happen.

The period of uncertainty and variability of interpretations among government agencies continues. There is still no direct ban on the purchase and sale of cryptocurrencies. What exactly does digital asset control look like now and what to expect in 2024? Understand the nuances of Bits rules and regulations. media was helped by GMT Legal lawyers.

Current legislature

Legal status of cryptocurrency

All attempts to establish the legal status are reflected in the 2020 federal law “On digital financial assets, digital currency and on amendments to certain legislative acts of the Russian Federation”.

Digital currency, according to the first article, is understood as “a set of electronic data (digital code or designation) contained in an information system that is offered and (or) can be accepted as a means of payment that is not a monetary unit of the Russian Federation, a monetary unit of a foreign state and (or) an international monetary or unit of account…. and in respect of which there is no person owed a duty to each holder of such electronic data».

That is, the concept of digital currency is vague and lacks specifics.. Based on this interpretation, we can conclude that not all cryptocurrency is digital.. Because not all cryptocurrencies lack an “obligated person”. For example, some stablecoins have issuing companies that guarantee the security of this asset. And for some tokens, the issuer is in the fog.

According to the law, digital currency is recognized as property — for example, in case of bankruptcy and enforcement proceedings. However, in most cases, the legal nature of cryptocurrency is not fully defined and, according to Russian legislation, it is impossible to unambiguously classify it as property.

Rules of circulation

Clause 5 of Article 14 of the law prohibits the acceptance of cryptocurrency as payment for goods, work and services by any Russian tax residents — legal entities, organizations, individuals.

According to the law, the rules for the circulation of digital currency on the territory of the Russian Federation must be regulated by other special federal laws. However there are none. Even under consideration in the State Duma there are no projects that could clarify the rules for the purchase and sale of this asset. Consequently, the turnover market is completely in the gray area.

How mining is regulated

Currently, the concept of mining is absent from legislation and is not regulated in any way.. However, such activities may be assessed by regulatory authorities as entrepreneurial. What gives rise to the obligation to pay taxes on income received from activities. At the same time, there is also no specific procedure for calculating tax or filing reports on profit/income received from mining.

How can you advertise cryptocurrencies?

Paragraph 7 of Article 14 of the law establishes a ban on proposals to accept digital currency in exchange for goods, work or services. That is, you cannot advertise such a payment method as a transfer to a cryptocurrency wallet..

Taxes on crypto transactions

Transactions with digital currency are subject to taxation, and those who received income from cryptocurrency transactions are required to pay income tax.

According to the order of the Federal Tax Service dated October 15, 2021 “On approval of the tax return form for personal income tax,” the income tax rate is progressive: 13% for income up to 5 million rubles and 15% for an amount exceeding this threshold.

New bills in the State Duma

The last proposed concept of full regulation of cryptocurrency circulation appeared thanks to the Ministry of Finance back in 2022. Immediately after the Central Bank’s proposal to ban cryptocurrencies in Russia. The idea of the Ministry of Finance, proposing total control instead of a ban, did not receive support for active promotion in parliament and further, right up to the law.. Turnover remains unregulated.

Regarding taxation: bill No. 1065710-7 is under consideration, introducing significant changes to the Tax Code of the Russian Federation. It was expected that the bill would be adopted in the fall of 2021, but this did not happen, and the draft is still in the State Duma.

How does the bill propose to calculate payments? The market price from which the tax percentage should be calculated at the time of each transaction will be determined by the Federal Tax Service.

The authors of the law require mandatory declaration of transactions with digital assets with an annual turnover of more than 600,000 rubles. It is proposed to introduce two new reporting forms:

notification of obtaining the right to dispose, including through third parties, of digital currency;

report on transactions with digital currency and digital currency balances.

The adoption of a law and the introduction of a reporting procedure may contribute to the adoption of a bill on mining, which introduces a mechanism for preparing and submitting reports on mined digital currency.

Regarding mining, it is assumed that the government will establish precise requirements for participants in direct mining and mining pools (subparagraph 3 of paragraph 3 of Article 1 of draft law N 237585-8). According to the proposals, the miner will be required to notify certain government agencies about the results of its activities. Presumably tax, although this definitely does not follow from the text. In the notification, if the bill is adopted in its current form, it will be necessary to indicate “a unique sequence of characters to track transactions with digital currency” (subparagraph 4 of paragraph 3 of Article 1 of the draft).

Miners will be able to sell the mined cryptocurrency “without using objects of the Russian information infrastructure” (subparagraphs 5 and 6 of paragraph 3 of Article 1). In other words, the authors of the law indirectly limit the circulation of digital currency on the territory of the Russian Federation. This indicates that the legislator is trying to delay the need to quickly introduce full market regulation.

The draft also contains a direct requirement to include any “offer of digital currencies to a wide range of people” in the list of prohibited advertising items (subparagraph “c” of paragraph 2 of Article 1 and Article 2).

All of the listed changes have only been submitted for consideration, but have not yet been approved.

Instead, the law on the digital ruble was urgently passed through the State Duma and found practical application in August..

What does the legislation on the digital ruble have to do with cryptocurrencies?

The digital ruble is just another version of a regular national currency, created and supported by the state. And cryptocurrencies, for example, Bitcoin, Ethereum and others, are decentralized digital assets that do not have a direct issuer associated with the state.

The legislation on the digital ruble regulates only the circulation of this special form of national currency and does not directly affect the circulation of cryptocurrencies. In fact, the state, with the help of the digital ruble, is trying to create something that has the characteristics of cryptocurrencies and blockchain: transparency of operations and their speed — in order to show that there is no need for people and businesses to enter the digital currency market.

We'll see what comes of this at the end of 2024 or beginning of 2025, when the Central Bank promises to make the digital ruble available to the masses.

As a withdrawal

In Russia, the status of cryptocurrencies remains not fully regulated. The existing concept of “digital currency” does not adequately cover the variety of forms of such assets. The turnover of cryptocurrencies remains in a gray zone and at the beginning of 2024 there is no noticeable progress in changing the status quo.

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