Russian Digital Law Bill Will Not Legalize Cryptocurrencies

News and Analysis

A draft bill aimed at protecting the rights of cryptocurrency owners while also regulating them in line with Russian laws was introduced to parliament in March with the biggest expectation being the legalization of cryptocurrency payments. However, as local media outlets report, the expectation of making digital currencies legal tender may not come to pass.

The bill aims to establish a legal basis for digital rights and digital transactions, Head of the State Construction Committee Pavel Krasheninnikov told Izvestia. The bill is also considered a proof that the State Duma (Russian parliament) sees cryptocurrencies a promising technology that should be entered into the country’s legal framework.

While the bill is aimed at being balanced, adding more rights and protection to cryptocurrency users, for the regulators, it is hoped these laws will eliminate risks of digital objects being used to place assets in an uncontrolled environment, by which criminal proceeds can be legalized.

While crypto payments will not be legalized under these amendments, the bill suggests that in the future, such currencies will be used as payment “in controlled quantities.”

Earlier, president Vladimir Putin told Russian Central bank and the government to provide an assessment of cryptocurrency, including all the risks it involves and whether it is necessary to utilize new technological solutions in banking. Also, he set a deadline on July 1 for relevant cryptocurrency legislation to be adopted in the country.

The bill considers digital confirmation of an identified user as his written consent, serving as a means of signing a “smart contract.” A transaction is considered complete after signing and can only be disputed if there is third party interference in the computer program’s operation.

The bill also legalizes processing and collecting large amounts of information.

Notably, the State Duma’s legal department has been advised to use the concepts “cryptocurrency” and “token” rather than “digital money” and “digital law,” based on terms that are used in practice.

The bill does not address all of the president’s directives, but its presents conditions for further regulation of the digital currency industry, said Igor Sudets, director of the Plekhanov Russian Economic University’s “Blockade for Lawyers” educational program.

Because cryptocurrencies and tokens are currently outside the legal arena, they can be used for bribes, withdrawing funds from bankruptcy, paying “black” salaries, Sudets said.

If cryptocurrency is not legalized in one form or another, Russia will miss the opportunity to withdraw from the shadows and consolidate a number of serious financial flows on its territory, the expert believes.

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