Russian Bill Prohibits Use Of Cryptocurrencies For Payments, But Allows Crypto Businesses To Remain Open
A Russian draft bill originally meant to regulate digital securities including cryptocurrencies has been updated to be less harsh and will likely come into effect in January 2021.
The original version of the bill submitted to the State Duma, the country’s parliament, stated that any business issuing or trading in Russia was illegal. A company found to be issuing cryptocurrencies could be fined up to $28,000 and buying cryptocurrencies using cash or a bank transfer from a Russian bank would result in either a $14,000 fine or seven years in prison.
Russia’s Ministry of Justice and Ministry of Economic Development quickly criticized the proposed law. The bill argues that people should not be allowed to utilize Russian infrastructure to engage with cryptocurrencies but that individuals could inherit them or that court’s could seize the cryptocurrencies with a warrant. The Justice Ministry argued that under this law, the courts would not be able to do anything with confiscated crypto because it would be illegal for them to sell it. The Ministry suggested building in some way for Russians to sell crypto abroad.
The Ministry of Economic Development also took issue with the proposed law, arguing that Russia should look instead to creating a controllable cryptocurrency market rather than driving out otherwise healthy crypto businesses, according to reporting by local outlet Kommersant. The country’s crypto community also took issue with the bill.
As a result of the pushback, the bill has been updated to allow crypto-related businesses to continue legally operating in Russia. This new version regards crypto as property, rather than as a currency and prohibits crypto from being used as a payment.
The new bill provides the first official and legal definition of cryptocurrency, which may help to clear up confusion and inconsistency in lower courts during crypto-related cases. Several lower courts have made conflicting rulings given the lack of clear definition of cryptocurrencies. The new bill categorizes the currencies as taxable property, but also notes that other laws need to be drafted to address issuing and use of cryptocurrencies.
The law has passed through the second reading by the State Duma. It will need to pass through one more reading by the same body, then through the Federation Council, and finally be approved by the President before coming into effect. Lawmakers suspect the law will make it through all of these channels and predict it will come into effect in January 2021.
By Emily Mason