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06 May


What awaits cryptocurrencies in Russia

The Law "On digital financial assets" was adopted in the summer of 2020 and came into force in January

Photo: Getty

/NOVOSTIVL/ Since the beginning of the year, regulation of the digital financial assets market (DFA) has appeared in Russia. So far, it is focused on large players who will be able to attract funding through the issue of tokens under the close supervision of the Central Bank. The first applications for the implementation of their projects were submitted by Norilsk Nickel and Sberbank. However, the issue of regulation of digital currency, including its production (mining), which is of concern to many, remains open. The authorities are disposed to tough restrictions, market participants warn that in the absence of legalization, this could lead to financial losses of the budget.

The law "On digital financial assets..." was adopted in the summer of 2020 and came into force in January. During the development process, the document has changed significantly. It was originally intended to regulate all financial instruments based on blockchain technology. But in the process of discussion and adoption from the law, the regulation of digital currencies almost completely disappeared, including those issued not in Russia - bitcoin, ether, etc.

Basically, the law that came into force describes the regulation and the possibility of existence in Russia of the CFA, which certify monetary claims and rights for equity securities, including the right of the holder of digital financial assets to demand the transfer of equity securities in the future. The document provides for the emergence of new entities that will be supervised by the Central Bank - operators of information systems and operators of exchange of digital financial assets. Legal entities and individual entrepreneurs can issue CFA. The circle of CFA buyers is not formally limited, but different rules apply for different categories.

So far, the law is primarily working to attract investments in large business, since the issuance of smart contracts (tokens) requires not only the issuer, but also the platform (operator), which he actually creates, which must be registered with the Bank of Russia.

According to the Central Bank, three applications for the inclusion of information in the register of information system operators and two applications for the inclusion of information in the register of exchange operators of the CFA are already being considered. The most famous contenders for the issue of the CFA remain MMC Norilsk Nickel and Sberbank, it was they who submitted applications to the regulator.

The largest shareholder of Norilsk Nickel, Vladimir Potanin, announced plans to engage in CFA more than two years ago. MMC is organizing the Atomize platform, which can implement the issue of tokens within a month after entering the Central Bank register. Nornickel has already tested the technology for issuing tokens in another jurisdiction using its Global Palladium Fund.

According to the managing director of the fund, Alexander Stoyanov, in the second half of January he issued the world's first tokens for metals. There are two types of them - industrial (for producers, copper and palladium are the collateral) and investment (gold, palladium, silver and platinum). All tokens are backed by physical metal, which is stored in London and Zurich in the vaults of ICBC Standard Bank and Brinks. Each investment token has its own type of share, all shares have been listed on the London Stock Exchange and Deutsche Boerse. In the first half of the year, investment tokens for nickel and copper will be issued.

According to Alexander Stoyanov, by the end of the year the fund expects to get listing on stock exchanges in Italy and Switzerland. He clarified that the estimated volume of digital transactions in 2021 will amount to 20% of all sales to industrial clients of Norilsk Nickel. The attractiveness of these shares, in particular, is that they show the transparency not only of ownership, but also the purity of metal production, from ore to its disposal.

Sberbank submitted an application to the Central Bank in January to register a platform for issuing savings and expects to launch it by spring. As the bank explained, we are talking about financial assets that have the technical properties of cryptocurrencies, in particular, they are taken into account by tokens in the blockchain network, they can be programmed in smart contracts. On the developed platform, banks and their clients will be able to issue and account for digital assets, the range of which is wide. “We are planning a digital bill of exchange of Sberbank as one of the first issues. We are working on issues of other assets where our clients will be issuers, ”the bank explained.

The Sberbank blockchain platform was tested at the end of last year by issuing renewable energy certificates. Such certificates allow, for example, solar power plants to sell proof of the generated green energy in kilowatt-hours, and investors can invest in this industry through the purchase of certificates. The platform is based on the Linux Foundation's Hyperledger Fabric protocol. The bank said the pilot was successful, showed a low entry threshold and ease of releasing a new instrument. Now Sberbank expects from legislators "clarity with taxation of the CFA."

The range of potential buyers of CFA is also narrowed. According to the law, the Central Bank has the authority to establish it, and the regulator has already issued a corresponding normative act. Unqualified investors can buy CFA for no more than 600 thousand rubles. within one year.

The choice is limited - assets are available that certify the possibility of exercising rights on securities included in the quotation lists of exchanges, and corporate bonds must have a credit rating not lower than the level established by the Central Bank. They can also buy assets that include monetary claims in an amount equivalent to the value of precious metals specified in the issue of these CFAs.

Such investors are not allowed to acquire digital assets issued in information systems organized in accordance with foreign law, as well as if the issuance decision does not specify the deadline for fulfilling obligations or the receipt of payments depends on the occurrence or non-occurrence of certain circumstances. The Central Bank clarified that the "study of investment issues" is still possible. However, given the tough position of the regulator regarding restrictions for unqualified investors in the stock market, in the case of the CFA, one should hardly expect serious relaxation.

Atomize Russia clarified that it is planned to issue special tokens for individuals and they meet the criteria for products for unqualified investors. For the convenience of working with these tokens, a mobile application is now being finalized for each group of buyers, explained the CEO of the company Ekaterina Frolovicheva.

But the main flaw in the law on CFA is the virtual absence of cryptocurrencies in it. After all the edits in the document, only the definition of the digital currency and an outright ban on its use as a means of payment remained. At the same time, digital currency (as well as DFA in general) can be an object of purchase and sale transactions, a collateral instrument, and be inherited.

But, says Alexander Zhuravlev, managing partner of the EDR law firm, "the market has not received clear rules for its turnover and qualifications." As explained in the Central Bank, the law regulating the procedure for issuing and circulating digital currencies will be developed separately. When this will happen is unknown.

On the one hand, this was good news for the market, since initially it was supposed to be tough, almost prohibitive regulation of virtual currencies. At the same time, regulators are not abandoning attempts to restrict cryptocurrencies in other ways.

Normative acts and bills are being developed concerning, in particular, taxation, administrative and criminal liability. This path involves decision-making by the authorities without significant consideration of the opinions of market participants.

According to Mikhail Uspensky, Deputy Chairman of the Board of the Chamber of Tax Advisers, among other things, it was planned to introduce administrative liability for illegal circulation of digital rights, for accepting cryptocurrency in payment for goods, works, services. Fines of up to 1 million rubles were announced. with the confiscation of the cryptocurrency itself. Criminal liability was proposed, including for failure to declare to the tax office.

The consultant says that some of the initiatives included prison sentences of up to seven years in prison. He adds that in many ways the fate of all these ideas will become clear after the State Duma adopts amendments to the Tax Code.

But, experts say, the lack of regulation has played into the hands of Russian cryptocurrency mining. This is a gray market that is difficult to assess, but Russia can be one of the leaders in it, and the growth prospects are great. According to Igor Runets, CEO and founder of BitRiver data center operator, in 2021 the share of computing power used by institutional investors in the bitcoin mining market will grow from a few percent to tens of percent. And the centers of mining, he said, could be the United States, China and Russia.

Clarifying the regulation of cryptocurrencies in Russia could put mining at risk. According to the co-founder of Exante Anatoly Knyazev, the risk is created, in particular, by the ban on the use of cryptocurrency as a means of payment.

Even if mining is formally allowed, but the miner cannot receive a reward in cryptocurrency, this will make the process meaningless, Mr. Knyazev is sure. You will have to mine on a foreign exchange, where digital currency will be converted to fiat currency, leaving a commission for this in another country. This will take mining abroad, the expert emphasizes, while by fully legalizing the industry, Russia could receive taxes.