Russia has revamped the rules of the cryptocurrency game within its borders. In short: cryptocurrencies like Bitcoin, Ether, and others can be traded, but no goods and services in Russia are allowed to be priced in it. If you want to buy a house with Bitcoin, you have to sell it for rubles first.
“It’s not the warmest crypto regulations we’ve seen to date, but also not the coldest,” says Mati Greenspan, founder at Quantum Economics. “In any case, it’s great that we’re finally getting more clarity regarding crypto laws around the world.”
More clarity came out of the Kremlin on July 31 when Vladimir Putin signed the new cryptocurrency law. It goes into effect in January 2021.
The law defines digital currency 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,” Russian news agency TASS reported. The digital currency cannot be used to pay for any goods and services.
The law also states that digital financial assets “are digital rights comprising money claims” and that owners and issuers have the ability to exercise rights under negotiable securities, rights to participate in equity of a non-public stock company and right to claim transfer of negotiable securities.” These assets can be sold, purchased, exchanged, and pledged. But they cannot be used as a means of payment just like a share in a company is only of any real value when it is sold for cash.
Russian banks and exchanges will be allowed to open cryptocurrency exchanges, provided that they register with the central bank.
Sergey Popov, a director at Sberbank, Russia’s biggest bank, says the new law now has them thinking of issuing its own stablecoin pegged to the ruble, business daily Kommersant reported on Tuesday.
According to the report, the stablecoin could be used for settlements involving other digital financial assets.
“The new law establishes the basis of digital assets and is a positive event for a blockchain community in (Russia),” says Nick Ovchinnik, 1inch exchange’s chief business development officer. “The timing of this event could not be better due to the rapid development of decentralized finance and other blockchain-based industries. The absence of digital assets rulemaking has put a significant amount of companies involved in mining, trading, and token economy into the grey area,” he says.
The majority of people involved in the crypto economy in Russia have always used digital assets as a store of value and not to buy goods and services.
There is some hope that the government will also make clear its rules on specific industries, like Bitcoin mining, and put forth a long-term commitment for both blockchain and crypto. Russians in this space have be clamoring about it for at least three years.
That the law is a positive step forward seems to be consensus among the crypto community in, and around, Russia.
For now, the space is anticipating the decision of the Russian Central Bank on the conditions they will set based on the law.
They can go two ways: tighten the limits even lower for retail investors to somewhere between $300 and $500, which is obviously not an investment. Or they can set a reasonable limit, a limit Anti Danilevski, CEO & Founder of KickEX.com, thinks is less likely. Danilevski operates a cryptocurrency exchange.
“People will understand that it’s much easier to invest through foreign platforms,” he says.
He also suspects that there will be corresponding organizations, such as brokers, who will obtain and manage investor funds and buy securities for them. Danilevski likens that model to the U.S. pre-1920s, when retail investors were getting in on the stock market and bought stocks the professional investor class wanted to dump.
Meanwhile, China is developing its crypto market very fast. The United States noticed that and quickly rushed into crypto rules and regulations. They’ve allowed U.S. banks to offer custody of crypto because they are worried about lose the crypto market to China.
“The Russian government has, as usual, been asleep at the wheel, and it has no idea what is going on in the world of crypto and blockchain,” says Danilevski. “We are already lagging behind in the economy and only now are we taking tiny steps towards the adoption of crypto. We are behind in the crypto race in this sense. The train has already left.”