The Blockchain Technologies and Cryptoeconomics Committee of the Russian public organization, with the support of the law firm Digital Rights Center, sent to the Ministry of Finance of the Russian Federation responses to the new bill on taxation of digital currencies. The reviews contain a detailed justification for criticizing this bill from a legal and cryptocurrency business points of view.
The Committee proposes following measures: 1) not to grant the FTS (The Federal Taxation Service) authority to determine the market prices of the crypto currencies for the subsequent taxation due to its possible abuse of this right; 2) revoke the bill on criminal liability for non-filing the tax reporting on transactions with digital financial assets; 3) reduce administrative fines for violating the rules when conducting transactions with cryptocurrency and instead to introduce a new federal law regulating the circulation of digital currencies.
The Committee includes the most influential representatives of the cryptocurrency industry (VEROS FP, Binance, EXMO, CoinBene Russia, OKEx, Bingbon, Colibri Group, Xangle, Coindar), representatives of public (Roskomsvoboda) and specialized professional organizations (the Russian Federation State Duma Expert Council on the Digital Economy and Blockchain Technologies under the Committee on Economic Policy, Industry, Innovative Development and Entrepreneurship), as well as lawyers in the field of international regulation of the crypto-assets circulation (Digital Rights Center).
The work of the Committee, formed by the representatives of the largest international IT companies and specialists of the field, is extremely important for establishing a balanced regulatory and legal framework in order to create a truly sustainable digital economy in the Russian Federation. The Committee work based on the experience of the international experts and participants together with government agencies will allow to integrate blockchain technology and corresponding projects in the Russian Federation.
The most significant drawbacks of the discussed bill are both an attempt to introduce completely inadequate criminal liability for failure to provide tax reporting on transactions with cryptocurrencies, and highly inflated fines for certain actions with digital financial assets. In fact, the bill isn’t aimed at some kind of adequate regulation and development of a legal position, taking into account the interests of the industry, but at reducing the interest of Russians in working with cryptocurrency assets and introducing taxation on what was previously not taxed. For this reason, the Committee considered it important to send its expert opinion on this bill.
Considering the tremendous experience of EXMO and similar platforms in passing compliance procedures in foreign banks and registration in foreign jurisdictions, where legislation on regulating the cryptocurrency circulation has existed for a relatively long time, we believe that we can make significant contributions to the development of legislative initiatives in Russia.
The rules for the cryptocurrency market are necessary to control the market and prevent problems amid the ongoing global adaptation of cryptocurrencies. However, it is difficult for legislators to develop adequate regulation on their own, although their work has an immediate huge impact on the market, and its results are extremely difficult to revise after any changes. The Committee tasks, among other things, are both the development of adequate regulation and the creation of SRO, whose members accurately understand the situation on the market, can easily find the best possible solutions, and contribute to the development of the industry as a whole. Xangle, being one of the experts in assessing the financial component in digital projects, observes the formation of the digital economy in Russia and notes that when approaching regulation, conditions must be created for the formation of a friendly ecosystem for blockchain technologies with the obligatory use of international experience, including lessons learned from trials and errors.
Such initiatives create an atmosphere of fear in society, and in the end can only lead to the fact that crypto enthusiasts and professionals in this field will be extremely cautious about taking any actions with cryptocurrencies, if not stop doing them at all. If we create bad conditions for the development of crypto projects, then it is obvious that they will go to more comfortable jurisdictions, where the tax rate is significantly lower, the legal system is much more stable, and where you can not be afraid to talk about how many crypto assets you have left in your wallet.
We are very positive about the market opportunities in Russia and are ready to make our significant contribution to its development. We sincerely hope that the upcoming legislation will also stimulate economic growth in this area. In our opinion, clear, transparent legislation, the main goal of which is not to restrict freedom, but to create conditions for productive work and growth, is absolutely needed. That is why we consider it necessary to take into account the opinion of direct market participants, people who have extensive experience working with digital financial assets in various jurisdictions around the world.
When it comes to effective regulation, it is important to consider not only existing practices and the expertise of industry professionals. It is much more important to consider the consequences that can affect the entire industry and all its participants if even minor mistakes and shortcomings are made in the regulatory development process. The 259-Federal Law "On digital financial assets" is not right at all, and will definitely have a negative impact on the industry. Having in mind all that, the Commission wrote feedback being guided by the best practices and took into account many factors in order to finally enter into dialogue with legislators.
According to the latest research, Russians are among the most active users of cryptocurrencies in the world. A huge number of Russian citizens are involved in the cryptoindustry, whose interests will be significantly affected after the adoption of the bills under discussion. In the form in which they exist now, the bills, in principle, do not meet the current market requirements and rather harm than protect the interests of the state and Russians, and the direct consequence of the adoption of this bill will be capital outflow from Russia. The purpose of the Commission is to unite direct market participants who see the situation from the inside, and convey the above information to higher structures.
The CoinBene exchange is interested in its development in various countries of the world, including Russia. Adequate regulation of the crypto industry on the territory of the Russian Federation will allow this market to develop in a legal manner and on a legal basis, which will attract not only internal participants of this market but also companies from the CIS countries and other countries. We see examples all over the world when loyal regulation of promising sectors of the economy brought the entire economies of countries forward and gave a huge inflow of investments and foreign capital aimed at developing both a specific sector and related areas. Both the cryptocurrency market and the blockchain market are very promising sectors capable of providing a significant inflow of investments and contribution to the overall economy of the Russian Federation. For this reason, the representative office of the CoinBene exchange in Russia takes an active position in the process of regulating the cryptocurrency market. Together with the members of the Commission, we use our experience and the experience of other countries to amend and adopt the most effective version of the legislation on digital assets, which will allow new cryptocurrency projects to appear freely, citizens will be able to widely use cryptocurrencies as a means of payment and material asset, and cryptocurrencies exchanges will be able to conduct legal and official activities on the territory of the Russian Federation, acting as drivers for the development of the entire market.
The evolution of financial markets and tools is necessary. Over the past few years, Russia has remained on the sidelines of direct regulation in the field of digital assets and cryptocurrencies, only in 2020 it first-time adopted a number of initiatives. The global trend aimed at digitalization and the adoption of IT technologies, supported today by a number of states, has reached the asset market, offering a reboot of almost the entire established model created by centralized sources. However, the future of this market must obviously be realized with the correct and reasonable adoption of the technological processes, to open up new opportunities for all market institutions, and at the same time must fully meet the requirements of legislative regulation, which should protect the rights of its citizens, and punish violators. The next trend is likely to be the process of digitalization and tokenization of various kinds of assets. A set of amendments created by experts of the Commission on Blockchain Technologies and Crypto-Economics indicates the important points necessary for consideration, the correct interpretation and adoption of which will help accelerate the development of the technological foundation of blockchain and IT technologies in Russia.
The cryptocurrency market services a global audience, and since it is an advanced sector and its development is very rapid, regulation in many regions is still at an early stage. Ultimately, all parties want regulation that actively promotes innovation and sustainability for an open market. Binance is always working closely with regulators around the world to help make positive influences on regulations that will benefit crypto industry. We are confident that the experience and expertise of global cryptocurrency companies representatives are necessary for the development and implementation of the regulatory and legal frameworks, which will contribute to the basis for the formation of a sustainable market in the Russian Federation.