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Russia’s State Duma hates bitcoin, ether, ripple, whatever. If it’s not the ruble or a currency issued by a state, the Russian government isn’t interested.
The government released an updated version of its new draft law “On Digital Financial Assets” for public comment on Monday, along with additional documents that will significantly change the way cryptocurrencies are regulated in Russia. Breaking the rules is now punished with legal penalties. But the good news is that Russians don’t have to give up their cryptocurrency fixation.
However, the law, which does not represent a major departure from the Kremlin or the Central Bank in terms of official positions on privately issued cryptocurrencies, bans all cryptocurrencies from circulation, mining and advertising.
“Cryptocurrencies are completely going into the gray area in Russia,” says Waves Enterprise Chief Product Officer Artem Kalikhov. “People who own a bitcoin or two are not at risk. But all cryptocurrency exchanges and wallets hosted on Russian sites with a .ru at the end are now at risk.”
The new law does not mean that Russians cannot legally own digital financial assets. The Central Bank of Russia has not yet introduced the rules for inclusion in cryptos as collateral. The Russian crypto market is still waiting for this.
Russian officials have been at odds over crypto regulation since January 2018.
Financial Markets Committee of the Duma. You can own cryptocurrencies like bitcoin, but you should declare it. cryptocurrency exchanges? Not welcome. (Photo by Vladimir GerdoTASS via Getty Images)Vladimir Gerdo/TASS
Anatoly Aksakov, member of the Russian State Duma, says that the country’s new crypto law will not come into force until the summer.
Aksakov said Thursday last week that people can buy and hold cryptocurrencies but should declare it on their taxes. The declaration gives them legal protection as the cryptocurrency is considered property. If they don’t declare it, they have no legal protection. In any case, according to a report by RBC Russia, there will be no legal penalties for owning cryptocurrencies.
“For us at KickEX, this is bad news,” says Anti Danilevski, CEO of the new KickEX, a cryptocurrency exchange run by the creators of KickICO, back in the heyday of the first coin three years ago.
“We were originally regulated in the European Union, not in Russia, because we expected it,” he says. “It’s a shame that cool tech startups have to leave the country and can’t operate in their homeland. We will now transfer our team to the EU,” he says. “It pains me to see my country moving backwards in cryptocurrency and digitization while the whole world is moving forward.”
Aksakov said “there will be no digital currency platforms on the territory of Russia” – meaning there will be no exchanges.
At the moment, the Russian crypto community is still chewing on the letter of the law and leaving it open to interpretation.
Tax evasion made more difficult by cryptocurrencies. Photographer: Chris Ratcliffe/Bloomberg© 2017 Bloomberg Finance LP
“Digital money” isn’t necessarily the same as “digital assets,” and the law appears to be dealing with tokens. They will be regulated and most likely introduced as private securities one day. If this is the case, one day it will be possible to conduct regulated security token offerings in Russia, they believe.
In this case, the hammer might not have burst through the crypto piggy bank.
“As far as I can see, this is a fight against cryptocurrencies, not with tokens or blockchain,” says Danilevski.
For those new to crypto, it’s worth noting that there are distinct differences between cryptocurrencies like bitcoin and other digital assets issued by a tech company that issues its own coin. While they all depend on blockchain technology; Blockchain technology does not require cryptocurrency.
Waves built a blockchain trading platform for the Moscow Stock Exchange’s National Settlement Depository to see how it would work when trading cryptocurrencies. But this project was never implemented. They are building a blockchain platform pilot program for Rosseti, a Russian power grid operator.
“This market in Russia is now developing steadily,” says Kalikhov. “The stance of Russian regulators is that cryptocurrencies are not allowed; and financial assets based on blockchain technology will be subject to regulation, but blockchain technology itself is still an experiment.”
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I write about global business trends, major economic dramas and investments, mostly in emerging markets. I’m also a retail investor with an interest in cryptocurrencies, so I tend to write about the investment ideas I’m considering myself. Ex-WSJ in Brazil. China-focused analyst at Coalition for a Prosperous America.
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