Financial regulatory authorities all around the world have long grappled with the status of cryptocurrencies. Especially in countries with a booming financial sector such as the United States, the increased public spotlight on blockchain technologies creates a series of complex legal questions. Regulatory authorities are tasked not only with categorizing and understanding what exactly cryptocurrencies are, but how the coins fit into existing legal structures.
Russia’s lower house of parliament has been successful in their first move in the direction of creating an acceptable framework for the classification and regulation of digital currencies. This past week, the house approved a set of new laws which would define cryptocurrencies. The implications of these pieces of legislation are clear; Russia may very well be on the path to creating a tax structure and a set of substantive regulations surrounding the monster cryptocurrency industry.
The bill elaborates on the exact definition of the type of currency, saying that the currencies are “property of value,” meaning that they hold, at least in some sense, an innate economic value which the owner of the currency can exchange for fiat currency.
The most important part of the bill is not the definition itself, but its focus on the multiple parts of the evolving blockchain ecosystem. Mining, wallet services, and Initial Coin Offerings are all clear aspects of the economic sector created by the blockchain technologies powering currencies like Bitcoin, and all function as clear components of an evolving financial sector.
The treatment of cryptocurrencies and tokens as property is incredibly important for the country when it comes time to place the currency into the existing regulatory framework within the country. Property held by individuals is typically subject to not only tax, but regulatory agencies tasked with overlooking, evaluating, and monitoring the economic sector to which the properties belong.
However, the bill also specified that, as of now, the currencies are not “legal methods of payment” within the Russian Federation. Despite this fact, the legislation still presented a comprehensive list of regulations and rules regarding the sale, trade, and use of the alternative currency within the borders of Russia.
But the legislation has drawn criticism from multiple sources for several key reasons. Specifically, some professionals within the industry fear that the law will make some entrepreneurs fearful of starting Russian ICOs. The wording of the bill posits that the currency is not, in a legal manner, a legal and legitimized currency.
The law comes in response to a property case ruling in early May of 2018. A Russian national filed bankruptcy in 2017 and was in hot water for refusing to include .2 BTC of his personal holdings in his disclosure to the creditor settling his debts. The courts deliberated on whether or not the cryptocurrency counted as property in a way that would force the man to disclose it for the purposes of settling a debt.
The conclusion of the case is generally viewed as a confusing decision which left more questions than answers. The court decided that the currencies were functionally “other property,” but the court’s lack of a substantive and binding definition made it necessary for the legislative branch to make their own.
This newest legislative win for Russian officials in the lower house represents the next step in the long road to the country coming forward with sensible and comprehensive cryptocurrency regulatory progress.