Russia Set to Lead Eastern Europe’s Crypto Boom after Passing of a New Digital Asset Bill

by | Nov 1, 2020 | Industry | 1 comment

Russia’s latest crypto law puts Russia in the same position as the UK on cryptocurrency taxation. However, there is a difference between the approach of the FCA and the State Duma. 

Unlike most jurisdictions globally, Russia has come to acknowledge the potential pros and cons of digital crypto by taking its first step to define and codify cryptocurrencies. The new Russian legislation known as “On Digital Financial Assets” draws a clear line for regulating crypto by authorities and how people and businesses can handle them in daily use. 

However, the new legislation may bring an end to payment and fintech companies interested in venturing into the Russian market. Though the Russian authority’s strategy towards digital assets resembles the one taken by the UK authorities, the restriction of the use of cryptocurrencies as a payment method draws a significant distinction between the countries’ approaches. 

Russia’s “On Digital Financial Assets” Bill

First, the “On Digital Financial Assets” bill defines the term “digital assets” and their use. According to a translation from TASS, a reputable Russian news agency, the bill defines them as digital rights, an aggregate of electronic data comprising money claims, negotiable securities, and rights to participate in the equity of a non-public company shares. 

The bill also outlines a long list of legal applications for DFAs, describing that they can be purchased and sold, or exchanged for other digital rights. Nevertheless, the possibilities are infinite; it has been elaborated that digital assets cannot be used as payment methods, nor can they be considered as a form of fiat money.  

Even though limited in a way, the new legislation legalizes crypto trading and exchange. The bill also sets out a skeleton of a regulatory framework for crypto issuers and exchanges, while traders and holders are classified as investors. 

Regardless of the possibility of legal application for DFAs, the new law is a considerable step towards cryptocurrency adoption in Russia, as the State Duma, in earlier recapitulations of the bill, had considered a more hostile crypto tone and even banned cryptocurrency activities. 

Cryptocurrency Taxation

The new law puts Russia in the same position as the UK on cryptocurrency taxation. Regulators from the two countries consider cryptocurrencies as property in the laws’ eyes and are not exempted from taxes on a personal and business level. 

The UK courts took a similar strategy in the case of AA v. Persons Unknown, where it was ruled that digital assets are classified as property for the law’s case. Besides, Her Majesty’s Revenue and Customs collects capital gains taxes on personal cryptocurrency investments and income and income tax in crypto trading from a business perspective.   

Meanwhile, it is not clear whether the Russian authorities will follow the take the same route. 

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1 Comment

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