Russia Cryptocurrency Laws
Regulation of Digital Currencies: Cryptocurrency, Bitcoins, Blockchain Technology
In July 2020, Vladimir Putin signed a regulation on digital financial asset (DFA) transactions that legalizes cryptocurrency transactions but prohibits their use as payments for goods and services. Russian banks and exchanges can be operators of DFAs if they register with the central bank known as the Bank of Russia. The Bank of Russia has the authority to maintain registration of information systems and register operators of DFAs and supervise” the business of information system operators.” To challenge cryptocurrency transactions in court, parties must have declared these transactions and their possession of cryptocurrency.
Starting January 1, 2021, cryptocurrency owners whose transactions amount exceeds 600,000 rubles ($7,757) in a calendar year will be required to report their crypto transactions and wallet balances to the Russian tax authorities. The law applies equally to individuals and organizations. Russian governmental officials will be required to declare if they have any cryptocurrencies. The reporting deadline for these individuals and entities will be on April 30, 2022. Additionally, crypto exchanges and miners will be required to provide information on their cryptocurrency transactions to Rosfinmonitoring, the Federal Financial Monitoring Service. The finance ministry stated that the regulation is necessary to prevent illegal cryptocurrency transactions, including money laundering. The law will take effect on January 1, 2021.
RussiaVirtual Currency Laws
The law defined cryptocurrency as “an aggregate of electronic data capable of being accepted as the payment means, not being the monetary unit of the Russian Federation or a foreign state, and as investments.” The law further adds that “digital currency cannot be used at the same time to pay for any goods and services.” The law defines DFAs as “digital rights comprising money claims, ability to exercise rights under negotiable securities, rights to participate in the equity of a non-public stock company and right to claim transfer of negotiable securities set in a resolution on the DFA issue.” DFAs can be sold, purchased, exchanged, and pledged but cannot be used as a means of payment.
Failing to report twice in three years or deliberately providing inaccurate information to the Russian taxing authorities constitutes a severe criminal offense. If a taxpayer fails to report transactions worth 45 million rubles ($615,000) or more in two of the past three years, they face punishments of a fine ranging from 500,000 to 2 million rubles, five years of forced labor, and imprisonment ranging from 18 months to five years. Penalties for unreported crypto transactions less than 45 million rubles include: monetary fines, forced labor, and shorter detention periods.
P.S. Insights on Cryptocurrency Legal Issues
Most jurisdictions and authorities have yet to enact laws governing cryptocurrencies, meaning that, for most countries, the legality of crypto mining remains unclear.
Under the Financial Crimes Enforcement Network (FinCEN), crypto miners are considered money transmitters, so they may be subject to the laws that govern that activity. In Israel, for instance, crypto mining is treated as a business and is subject to corporate income tax. In India and elsewhere, regulatory uncertainty persists, although Canada and the United States are relatively friendly to crypto mining.
However, apart from jurisdictions that have specifically banned cryptocurrency-related activities, very few countries prohibit crypto mining.
Our Freeman Law Cryptocurrency Law Resource page provides a summary of the legal status of cryptocurrency for each country across the globe with statutory or regulatory provisions governing cryptocurrency. The globe below provides links to country-by-country summaries:
Other Cryptocurrency and Blockchain Resources:
- Blockchain Technology Explained: What is Blockchain and How Does It Work?
- Legal Issues Surrounding Cryptocurrency
- Cryptocurrency and Bankruptcy
- Cryptocurrency Transactions: Multi-Signature Arrangements Explained
- Cryptographic Hash Functions
- Distributed Ledgers The technology behind Blockchain brings business opportunities and legal complexities
- Hard and Soft Forks: A Detailed and Simplified Explanation of How Blockchains Evolve
- Hash Collisions Explained
- IRS Cryptocurrency Taxation: What you Need to Know in 2020
- Merkle Trees
- Mining Explained: A Detailed Guide on How Cryptocurrency Mining Works
- Preimage Resistance, Second Preimage Resistance, and Collision Resistance
- Quantum Supremacy’s Potential Impact on Cryptocurrencies
- SHA-256
- Smart Contracts
- The History of the Blockchain and Bitcoin
- Blockchain Attacks: Is No One Safe in the World of Cryptocurrencies?
- Cryptographic Hash Algorithms: An Introduction
- Overview of the Most Common Cryptocurrencies
- Double-Spending Problem and Byzantine General’s Problem in Relation to Cryptocurrency
- IRS Cryptocurrency Taxation: What you Need to Know in 2020
- Permission and Permissionless Blockchains
- The Tor Network
- Turing Completeness and cryptocurrency
- Cryptography: Public Key Infrastructure (PKI)
- Blockchain Attacks: Is No One Safe in the World of Cryptocurrencies?
- Decentralized Governance Mechanisms
- The Dark Web and the Deep Web
- The Most Common Cryptocurrencies
- Anti-Collusion | What Is Obfuscation?
- What Is Post-Quantum Cryptography?
Podcast:
The Freeman Law Project – Cryptocurrency Regulation and Taxation: A Brief Primer
Is cryptocurrency legal in Russia?
Do you have questions about cryptocurrency, digital currencies, or blockchain technology?
Freeman Law can help with digital currencies, tax planning, and tax compliance. Contact us now to schedule a consultation, or call (214) 984-3410 to discuss your cryptocurrency and blockchain technology concerns.
[1] Roger Huang, Russia Backs Away From Total Cryptocurrency Ban, Forbes, (2020, August 10).
