“Digital Law”: how Russian crypto-media got banned. Part 1

The bad winds of digital change

On July 1, 2020, Russian President V.V. Putin signed the federal law “On digital financial assets, digital currency and on amendments to certain legislative acts of the Russian Federation“.

The document is quite voluminous – 107 pages – and its full text can be found at link. The law comes into force on January 1, 2021.

This piece of legislation contains the definition of digital currency and digital financial asset. We will not deal with a detailed analysis of the content of the document, but we note that the law prohibits the use of cryptocurrencies as a means of payment on the territory of the Russian Federation (i.e., paying with cryptocurrencies for services rendered and goods purchased).

Citizens of the Russian Federation can buy cryptocurrencies in credit institutions – only if they are issued in full compliance with Russian legislation. Russians also have the right to acquire digital assets issued outside the Russian legal framework, but only on foreign trading floors.

The new law separates investors into categories. And the official purpose of the classification is to protect the interests of inexperienced participants in the stock market.

The adoption of the document implies the introduction of appropriate amendments to a number of existing laws regulating the operation of the securities market in Russia. The role of the regulator is naturally assigned to the Central Bank of the Russian Federation – it is he who will prescribe the standards for qualified and unqualified investors.

After the entry into force of the law, all qualified investors will retain their previous status, regardless of the new requirements of the Central Bank. But unqualified investors (that is, you and I) will be limited not only by the amount of transactions, but also by the arsenal of trading instruments. To remove the restrictions, you will have to obtain the status of a qualified investor or pass a qualifying exam for the right to access a particular exchange commodity.

Personally, I am offended to hear that I am less competent than the “qualified” investors of the notorious Sberbank. Even in the bull market in 2018-2019. they managed to earn only a few percent a year in ruble-denominated investment projects, which did not cover the inflation rate. And it’s even more offensive to realize that I was deprived of the right to dispose of my funds at my own discretion – they say, I’m not smart enough for this.

Please note that the new law provides for a severe restriction of the right to inform the public about cryptocurrencies and their advantages in relation to fiat currencies. From now on, enlightenment will be regarded as advertising, potentially capable of harming “unqualified” citizen investors.

A very good informational crypto-portal, Coin Post, has already fallen under the distribution. Rosnadzor, by a court decision, blocked access to the publication’s website for residents of the Russian Federation. Are we really so undeveloped that we are not able to analyze information and make independent decisions?!

Meanwhile, the Ministry of Finance is preparing amendments to articles 46 and 146 of the Budget Code of the Russian Federation – in terms of clarifying the list of sources for replenishing the budget of the Pension Fund of Russia (PFR). “Clarifying amendments are now being made to the Civil Code, which, in established cases, can be confiscated not only property in respect of which <…> evidence confirming the acquisition of property for legitimate income, but also money in the absence of evidence of the legality of their receipt“, – said the press service of the Ministry of Finance.

In other words, we can be told –we freeze your account or seize your car until you provide us with proof of its legal purchase“. Excuse me, but what is this, if not the presumption of guilt?

And all this is served under the guise of seizing illegal savings from unscrupulous officials in order to transfer confiscated valuables in favor of the FIU with care for elderly fellow citizens. And before that, they didn’t seize it, because they didn’t know how to attach the confiscation?

Have you ever wondered what the size of the pension in your region is for a person who has trumpeted at a factory for 45 years? What about someone who worked a couple of months in their entire life? Ask. The desire to work and pay taxes is guaranteed to “flare up” with violent force. So the purpose of the bill is definitely not to take care of the elderly. By the way, the previously mentioned Ministry of Finance wants to confiscate the illegally withdrawn foreign currency. To this end, relevant amendments to Art. 104.1 of the Criminal Code of the Russian Federation.

A disturbing breeze of change

On completely legal grounds, you can purchase on the territory of the Russian Federation – through a “qualified” intermediary – some kind of “VTB-coin” (unless, of course, VTB decides to take advantage of the new law and issue a digital financial asset). But do you need it?

Do you want to buy bitcoin, but its release is not regulated by the laws of the Russian Federation, and this cryptocurrency does not have a responsible beneficiary that regulates its issue?

If the desire does not weaken, implement it on a foreign site. But keep in mind that buying 0.01 BTC will not result in any terrible consequences, but it will not bring you anything significant and tangible.

And if you buy on a foreign site, say, more than 10 bitcoins, for this you will have to deposit solid funds on a foreign exchange – in other words, withdraw them abroad. And when the amount exceeds 9 million rubles, in addition to “assisting” the FIU, you can safely count on voluntary-compulsory labor for about 14 years.

But that’s not all. Suppose – in the case of a two-fold (or three-fold) increase in the bitcoin rate – you decide to sell the cryptocurrency and buy an apartment. We are forced to recall what was written above again: think about it, how do you plan to prove the legality of the origin of the funds? “Two years ago, I withdrew a particularly large amount outside the Russian Federation in order to acquire a digital asset not regulated by the law of the Russian Federation for its subsequent sale for the sake of obtaining material benefits?» At this point, your funds will definitely go to the FIU, and you will get off with a term – if you are very lucky, then conditional.

Miners, by the way, should not relax either. Yes, the term “mining” is not mentioned at all in the new law, but the concept of “issue of a digital financial asset” is spelled out very clearly. Doesn’t your “mining” fall under the concept of “issuing a digital asset and participating in its emission”? Moreover, participation is illegal.

How to be? What to do? Look for answers to these questions in the continuation of the material.