Exclusive Insight from Russian Legal Experts in the Crypto Space
Russia has been a hot topic for some time now.
There’s been news about a new crypto law which might pass soon. In addition, media in the space reported on a crypto investment bank being launched by the payment system Qiwi, while several months earlier we learned about a state bank doing a successful blockchain test pilot.
All of this sounds pretty positive. But is it?
We talked with crypto-focused lawyers and learned the latest developments.
Crypto laws will be passed soon
You might’ve heard that a crypto law is about to pass, but in fact the bill has just passed its “first reading.”
Here’s what Michael Polikahin, Attorney at Law and Partner of the Moscow Solicitor Board Yurasov, Larin and Partners has to say:
“We are nowhere near adoption. There will be two other readings in the lower chamber, and then it goes to the higher chamber. Then the President will have to sign it.
“I am sure that there will be lots of changes. I’d say give us 6 months to 1 year before this thing passes.”
For now, the only thing you can do is to read the bill. And we did that so that you don’t have to.
Tough Regulations to Come
The current version of the bill is extremely restrictive. Some sections operate on notions that don’t exist yet. In others, regulation is tough, prohibiting individuals from investing more than $1,000 in a single ICO and asking ICOs to report on each at every step they take.
As Roman Yankovskiy, a Partner at the Zartsyn, Yankovskiy & Partners Law Firm, comments:
“This law is the first attempt by the Finance Ministry to push through very strict stipulations. Surprisingly, though, the Finance Ministry, which is always after taxes, says nothing about taxation at all.
“Clearly more laws are to follow. For now, we don’t know what exactly future legislation will look like.
“Previous policy demanded that nodes register their passport data. This requirement has been canceled. But large chunks of the text still look pretty strange.”
However, remaining positive — even in the toughest conditions — is what makes Russians so resilient to whatever life sends their way.
Roman Yankovskiy is a poster child for this optimism:
“This is a skeleton for how the crypto industry is going to work. Nobody knows — not me, not you, not the Finance Ministry — what this is going to look like in the end. It’s just a framework.
“It looks like we are going to have several state-controlled operators which will process crypto-to-fiat transactions, nationwide. Naturally, some people might want to transact directly through foreign crypto exchanges or trade their crypto directly. Just like you can exchange USD and rubles in the streets.
“This is another manifestation of our state focus here in Russia. Our economy is controlled by state structures, so it’s no surprise that the crypto industry will follow suit. The government will control cash flows and people will identify themselves in order to invest. In contrast to some European jurisdictions, like Switzerland, where the stance is more in favor of crypto freedom, Russia will do what it takes to control as much of the action here as it can.
“But, just as people still have businesses and jobs and make money in Russia, so local crypto projects will learn to adapt to the existing conditions and survive.”
Yes, they might survive, in the future. But Russian teams might wonder whether they should wait for the new law to kick in before they launch here.
Should you do an ICO in Russia? Or should you wait for the new law to pass first?
This is what Michael Polikahin has to say about whether it’s a good idea to do ICOs in Russia now or after the law has been passed:
“It’s very hard to do ICOs in Russia right now. And when the law passes, it’s still going to be tough.
“That’s why many experts advise basing ICOs in other jurisdictions.”
So, for now at least, the experts say “don’t do ICOs in Russia.”
Is it OK to hold crypto if you are Russian?
This is a great question to ask. Right now there’s still no law in place, so it’s a completely grey area. Virtually nobody knows whether it’s OK or not. Since Russia is not a completely totalitarian country, holding crypto is not viewed as a crime. There are simply no laws yet on this issue. Current legislation doesn’t have an opinion on Bitcoin.
However, trading crypto at a local exchange, or larger exchanges, under your real name can be a problem.
Michael Polikahin comments on using your real name when trading crypto:
“It’s generally better to trade without using your real name. Various problems might arise if you decide to trade under your real name. But pseudonymity is an important part of cryptocurrencies, after all.?
In a Nutshell
It seems Russians trading crypto are currently safer on foreign exchanges, without using real names.
If you are a Russian team with a cool ICO idea, do your ICO outside of Russia. Even when this law passes, it’s going to make running ICOs in Russia pretty tough. Many companies are instead considering places like Zug, Singapore, and Hong Kong.
If you want to start a grassroots exchange, a big-time exchange, or an investment fund in crypto in Russia, well… don’t. All of these things are illegal in Russia.
If you are a potential investor, trying to figure out whether you can find some hidden ICO-gems in Russia, you should be aware that Russia is like China in this regard. ICOs are not currently launching in Russia.
Despite my inclination towards optimism, the current situation in Russia is far from positive. We’ll have to wait and see to find out what form Russia’s state-led cryptonomics will ultimately take.