A Draft Bill Implying Bitcoin Legalization Introduced in the Russian Parliament

News and Analysis
20.12.2015

December 18, a draft code implying penalization of issuance and exchange of, and operation with “money surrogates”, was introduced to the Russian Parliament, the State Duma. Russian authorities were going to equal cryprocurrencies to the said surrogates, and even introduce criminal and administrative punishment for any operations related thereto.

The new code should have becone the first step to banning cryptocurrencies in Russia. However, suddenly the legislators nearly legalized bitcoin operations within the Russian Federation.

In particular, clause 30.38 of the code provides administrative punishment for “malevolent issuance of money surrogates”. The surrogates themselves, according to the draft code, are described as “objects of property rights, including those electronic, intended for usage as exchange and/or payment means issued in the Russian Federation, not considered as official payment means in the legislation of the Russian Federation”.

This description makes any cryptocurrency issued beyond Russia a non-surrogate. However, distinguishing bitcoins mined in Russia from those mined, say, in Ukraine seems a difficult thing to do. Moreover, tle legislators also opted to exclude “any digital money issued and circulating in compliance with the laws of CIS countries, the European Union, and Great Britain” from the category of money surrogates. In other words, in case bitcoin is legal in any of those juridsdictions, it cannot be treated as a money surrogate in Russia. The European Court of Justice recently issued a ruling, which recognizes bitcoin as a cutrency, while the UK has been active on development of cryptocurrency regulation for several years.

Moreover, bitcoin meets the requirements set forth for electronic money in the law “On the National Payment System”. Thus, the new code’s authors in fact propose to legally copypaste any decisions by EU and UK regulators in Russian legal environment.

However, the footnote for the clause even proposes to free a person from adminstrative responsibility in case of “using assets subject to being classified as money surrogates by a person being identified or being under the process of simplified identification”. In other words, even in case the government legally dubs cryptocurrency a money surrogate, a person will still bear no responsibility of using it in case he or she provides their identification data.

Also, the draft law provides for no punishment in case of one-time usage of documented, i.e. material, form with no intent of further usage, say, as a souvenir. It means that in absence of proof of systematic usage of cryptocurrency (in case it is still considered a money surrogate) no one can be punished for using it.

As for prohibition of software for creation of money surrogates, and intended distibution of information sufficient for issuing thereof in media, there are also a few exceptions. In particular, “distribution at dedicated events or in dedicated publications” is not a wrongdoing according to the draft law.

Even though the draft law does imply administrative punishment for issuing and operating money surrogates, exceptions thereto completely cover bitcoin. The prolonged ambiguity of bitcoin status in Russia seems to have somehow resolved, and its banning is apparently postponed for an indefinite term.

UPD 21-12-2015 – From Draft Bill
Clause 30.38 Malevolent issuance of money surrogates
1. Issuance of money surrogates without statement of person or persons performing such issuanse, and/or should such issuance is not provided for in the legal codes of the Russian Federation, or is performed in violation of procedures established under the legislation of the Russian Federation, in case such activity incorporates no criminally punishable acts invoke administrative penalty to the tune of twenty thousand to forty thousand rubles along with confiscation of the administrative violation item for citizens; fifty thousand to seventy thousand rubles along with confiscation of the administrative violation item for entrepreneurs; eighty thousand to one hundred thousand rubles for officials; two million to three million rubles along with confiscation of the administrative violation item for legal entities.
2. Actions as set forth in clause 1 hereof performed with application of information and telecommunication networks, or committed within more than one subject of the Russian Federation invoke administrative penalty to the tune of forty thousand to fifty thousand rubles along with confiscation of the administrative violation item for citizens; eighty thousand to one hundred thousand rubles along with confiscation of the administrative violation item for individual entrepreneurs; one hundred and fifty thousand to two hundred thousand rubles for officials; four million to five million rubles along with confiscation of the administrative violation item for legal entities.
Notes:
1. For purposes of present clause and other clauses of this Code, money surrogates are interpreted as objects of property rights, including those electronic, intended for usage as exchange and/or payment means issued in the Russian Federation, not considered as official payment means in the legislation of the Russian Federation.
2. The following items are not considered money surrogates:
1) electronic monies being provided and circulating in accordance with the Federal Law “On the National Payment System”.
2) electronic monies being issued and circulating in accordance with provisions set forth in the legislation of the CIS countries, the European Union, and the United Kingdom.
3) conventional units of account not intended for usage as payment and/or exchange means.
4) goods with inherent use value, including their non-recurring usage for discharge of liability (offset of connatural counter-claims) by the parties to the settlement.
5) means employed exclusively for procurement of items having no inherent use value, including those in multiplayer computer games.
6) assets employed exclusively for ranging (rating) of their associated objects in terms of charactertistics without expressed value terms, such as experience, achievements, qualifications, degree of trust, etc.
7) confirmation (including that electronic) of receipt of goods, works, services, or results of intellectual activities from supplier thereof, employed for recording of debt of such consumer to such supplier.
8) confirmation (including that electronic) of advance payments for goods, works, services, or results of intellectual activities to the address of supplier thereof, employed for recording of debt of such consumer to such supplier.
9) confirmation of right to receive goods, works, services, or results of intellectual activities from particular suppliers thereof on free-of-charge basis, or with a discount under a promotion campaign (provided the stated particularization is present).
10) confirmation of right to receive goods, works, services, or results of intellectual activities, as well as other perks without expressed value term from particular suppliers thereof on free-of-charge basis, or with a discount under educational, information, sports, or cultural and enlightenment event limited by a particular venue (including a website on the internet) and a calendar date (two consequential calendar days within the same year at most) (provided the stated particularization is present).
11) Imitation of cash monies of the Russian Federation and foreign states, and other circulating monies, bearing grossly visible size, color design, or textual content features evidencing their imitative nature, and used exclusively as souvenirs, advertising materials, or informational materials.
12) Objects of property rights operations with which are subject to licensing.

Clause 30.39 Cicrulation of money surrogates
1. Direct or indirect concussion to pay for goods of inherent use value with money surrogates by a supplier thereof under a civil transaction in absence of an opportunity to effect such payment without money surrogates, in case such actions (or lack thereof) incorporate no criminally punishable acts invoke an administrative penalty to the tune of forty thousand to fifty thousand rubles along with confiscation of the administrative violation item for citizens; eighty thousand to one hundred thousand rubles along with confiscation of the administrative violation item for individual entrepreneurs; one hundred and fifty thousand to two thousand rubles for officials; four million to five million rubles along with confiscation of the administrative violation item for for legal entities.
2. Purchase and sale of money surrogates for the currency of the Russian Federation or a foreign currency, should those actions incorporate no criminally punishable act, invoke an administrative penalty to the tune of twenty thousand to thirty thousand rubles along with confiscation of the administrative violation item for citizens; fifty thousand to seventy thousand rubles along with confiscation of the administrative violation item for individual entrepreneurs; eighty thousand to one hundred thousand rubles for officials; two million to three million rubles along with confiscation of the administrative violation item for legal entities.
3. Operations as to carve-out of money surrogates with consideration of goods, works, or services, should those actions incorporate no criminally punishable act, invoke an administrative penalty to the tune of five thousand to ten thousand for citizens; twenty thousand to twenty five thousand rubles for individual entrepreneurs; forty thousand to fifty thousand rubles for officials; eight hundred thousand to one million rubles for legal entities.
4. Operations as to free-of-charge provision (giving away) of money surrogates to third parties invokes administrative penalty to the tune of two thousand to three thousand for citizens; ten thousand to fifteen thousand rubles for individual entrepreneurs; twenty thousand to thirty thousand rubles for officials; four hundred thousand to six hundred thousand rubles for legal entities.
Note. The following actions are not deemed administrative violations subject to punishment provided herein:
1) usage of assets subject to being classified as money surrogates by a person being identified or being under the process of simplified identification.
2) creation of an account for a particular person within a title filing system for money surrogates in absence of this person’s acceptance of conditions for using such money surrogates and performing operations as to carve-out, transferring, and/or spending thereof.
3) one-time usage of money surrogates in documented form, as a souvenir, with no intent of further usage thereof.

Clause 30.40 Assistance in money surrogates circulation
1. Manufacturing for distribution purposes, or release of software, sufficient and necessaary for issuance of money surrogates, should those actions incorporate no criminally punishable acts, invoke an administrative penalty to the tune of twenty thousand to forty thousand rubles along with confiscation of the administrative violation item for citizens; eighty thousand to one hundred thousand rubles along with confiscation of the administrative violation item for individual entrepreneurs; one hundred and fifty thousand to two hundred thousand rubles for officials; four million to five million rubles along with confiscation of the administrative violation item for legal entities.
2. Intended distribution of information sufficient and necessary for issuance of money surrogates in media and information and communication networks invoke an administrative penalty to the tune of eight thousand to ten thousand rubles for citizens; eighty thousand to one hundred thousand rubles for individual entrepreneurs; one hundred and fifty thousand to two hundred thousand rubles for officials; four million to five million rubles for legal entities.
Note. Distrubution of the information as set forth in part two of this clause at dedicated events and in dedicated publications is not an administrative violation.

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