14.August 2022

Russia Still To Ban Crypto? A Bill To Ban Digital Assets Has Passed First Reading

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The State Duma, Russia’s lower house of parliament, has submitted legislation making it illegal to pay with cryptocurrency. The bill’s sponsors want crypto platforms to be tasked with preventing transactions that could promote digital asset payments.

A law proposed a week ago in the State Duma, Russia’s lower house of parliament, was quickly passed through first reading. It would be illegal to use “digital financial assets” (DFA) to pay for products or services if it became law.

Despite the fact that the paper says that DFA exchange managers must withhold any agreements involving the use of tokens as a monetary substitute, the prohibition could be lifted in circumstances “prescribed by federal laws.”

The bill’s authors further highlight that the Russian currency is the country’s only legal tender. They claim in an explanatory note that the restriction will eliminate the risk of digital assets being used as’monetary surrogates.’ They intend to compel coin and token producers, as well as exchange and investment platform operators, to refuse to accept transactions involving crypto payments.

Such entities are classified as subjects of Russia’s national payment system under the law. This means they’ll have to register with the Russian Central Bank. The central bank has been a vocal opponent of the legalization of crypto-related businesses, particularly payments, claiming dangers to the country’s financial stability as justification.

Legal experts have previously criticized the bill for strengthening regulations on digital rights and tokenized assets. One of the biggest conceptual flaws in the bill is that it considers DFAs, which are known as tokens rather than cryptocurrencies, as a payment method while they are most commonly used as security tokens. Another omission is the word “monetary surrogate”; while the measure attempts to outlaw the use of DFAs as a monetary surrogate, Russian law lacks a precise definition of the term.

The current law on Digital Financial Activities took effect in 2021. The tax reforms on DFAs were first read in the State Duma in May 2022. Separately, two other significant legislation are still making their way through the legislative process. A measure titled “On Digital Currency” would establish the legislative framework for cryptocurrency in general, while a law titled “On Mining in the Russian Federation” would establish mining parameters.

The implementation of the new law “On Digital Currency” has been postponed due to ongoing talks and several amendments of the text, which was first given to the government in February by the finance ministry. Last month, Russian MPs approved modifications to the taxation of cryptocurrency transactions in first reading.


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