Future of crypto in Russia. Speakers’ opinions.

Today, February 18, 2022, a joint bill of the Ministry of Finance and the Central Bank on the regulation of cryptocurrencies in Russia will be published.
Recall that the discussion about the future of the industry in Russia flared up again on January 20, when the Central Bank of Russia released a report on the high risks of cryptocurrencies and proposed to almost completely limit work with them in the country. The main opponent of the Central Bank was the Ministry of Finance, which openly advocated the need to regulate the sphere.

We decided to collect information about what theses from the jointly developed draft of the law are already known to us and what the speakers of Blockchain Life 2022 think about it and the future of crypto assets in Russia.

The concept of the Ministry of Finance was approved by the government on February 8 but the plan of the ministry was heavily criticized by the Central Bank. Big commentary on the main critical theses of the Central Bank was given by an entrepreneur, head of the Ethereum Russia Competence Center and founder of BlockGeeks Vladislav Martynov for the Blockchain Life press center.

“The Central Bank believes that all cryptocurrencies and crypto projects are pyramid schemes. It is not true. The majority of crypto projects do not correspond to any of the signs by which a financial pyramid is determined. Pyramids are shell companies that have no business and no product or service. The only thing they do is use the later investors’ money to pay the interest and return the money to the earlier ones. This is not the only, but the main sign of the pyramid. You will not find a single crypto project with this feature in either the TOP-20 or the TOP-50.

Cryptocurrencies are an innovative technology, on the basis of which new online services and application solutions are already being built.

The next thesis is that the Central Bank believes that cryptocurrencies are not backed by any assets and this is also an incorrect statement.

First, they are backed by breakthrough technology on which the global financial system is already being built. The second asset is that technology is used by millions of people. They trust the system and invest in it. I would like to ask representatives of the Central Bank of the Russian Federation why these factors are an asset in ordinary banks and hi-tech companies but not in crypto projects?

In addition, if we talk not only about bitcoin, but also, for example, about ethereum, then the number of developers and application solutions existing in the system is added to the list of assets. Let me remind you that tens of thousands of developers work on the ethereum blockchain and develop thousands of solutions and services.

Regarding the risks of investing in cryptocurrencies listed by the Central Bank – under normal conditions, a bank or a broker informs the investor about the possible risks and creates his personal investment profile. It indicates a willingness to take on higher or lower risks. A similar tool can be used with cryptocurrencies. Why a total ban? You can invest in stock market shares, you can invest in real estate and banks, but you can’t invest in cryptocurrency?

The Central Bank also notes the danger of withdrawing funds from the real sector of the economy – I assure you that its financing on the contrary will become even more effective. For many representatives of small and medium-sized businesses, raising finance not through banks is a much more attractive way. And in general, linking the system of crypto assets to banks only gets in the way. Let people finally realize the responsibility for their funds.

And in order not to create the “illusion of state protection of investors”, various procedures (KYC, qualification) can be carried out not through the banking system, but through separate online services.

In the end, one should not forget that the proposed limits are also a restriction on the right of citizens to freely dispose of their money.

A fairer and more efficient system of finance has appeared and is developing before our very eyes and the most advanced states with a developed and high-tech economy, with the “economy of the future”, are implementing it in their countries. Let me draw an analogy with the advent of the Internet. It fundamentally changed the business models of most companies. Those who resisted this process simply could not stand the competition and disappeared from the market. And the countries that held back the penetration of Internet technologies on their territory lost significantly both economically and politically.”

The general public already knows certain theses of the concept of the Ministry of Finance – and it is obvious that it is of a compromise nature. The concept tries to take into account the requirements of all government departments but at the same time preserve the possibility of working with cryptocurrencies in the country.

In particular, the agency proposes to divide clients into qualified and unqualified investors, launch a system for analyzing crypto payments and create cryptocurrency exchange operators. In addition, for unqualified investors, it was proposed to limit the purchase of cryptocurrency to the amount of 50 thousand rubles.

Bits.Media founder Ivan Tikhonov commented on the theses of the upcoming bill:

“First of all, you need to wait for the bill itself to study it. Until now, there are unsettled differences in the proposals between the Ministry of Finance and the Central Bank. Also, not all restrictions and requirements are now announced. For example, it recently became known that simply having 6 million rubles in an investment account may not be enough to obtain the status of a qualified investor for working with cryptocurrencies, as was previously thought.

In any case, the expressed position of many ministries is encouraging that bans on operations with cryptocurrencies and mining will be ineffective, slow down technological development, deprive the budget of part of the income, lead to the migration of young professionals and other risks.

At the same time, it is already clear that some of the proposed restrictions will not satisfy a part of the crypto community, which initially sought to have no third-party control and participation of third parties in operations. But it is difficult in general to come up with laws that would satisfy everyone.

Here you need to understand that those who use cryptocurrencies for criminal purposes do not comply with the laws anyway. Therefore, the appearance of new laws will not change much even if they are completely prohibitive. The gray zone will partially become white, that is, it will get the opportunity to work openly, and the state will only benefit from this. Well, the classic business that wanted to work with cryptocurrency in Russia will finally get such an opportunity – this will also be a white zone.

So, in general, the movement is going in a positive direction and we will discuss the nuances when the specifics appear in the bill. The main thing is that it should not turn out to be as initially stillborn as the CFA law and take into account the real situation that is happening in the world.”

Roman Kaufman, co-founder of Berezka DAO commented on the state of the industry today and the need for regulation:

“I am completely FOR the regulation of digital assets in Russia, as now it is more like the 90s. Especially in the field of exchange, when dollars were bought near bread shops and markets.

At the moment, the market for buying/selling digital assets is very heavily criminalized – there are a lot of “muddy characters”, an insane amount of “dirty crypto”, hackers, lockers and cash flows. It’s time to put everything on regulative rails. And in this regard, full identification (KYC / AML), as proposed in the “concept for regulation”, is a reasonable step that all the Western democracies of the world use.

As for mining, it has long been a part of business in the Russian Federation. Legalization will allow you to receive additional taxes, as well as protect entrepreneurs from illegal seizure of business by law enforcement agencies. And regulation will give an influx of institutional money into the industry. This means that all participants in the crypto market will benefit.

I am concerned about the point that “transactions with the equivalent of more than 600 thousand rubles must be declared, transactions outside the legal sector for such amounts will become a criminal offense and an aggravating circumstance under the Criminal Code and fines will be introduced for the illegal acceptance of cryptocurrencies as a means of payment.”

In my opinion, 600,000 rubles is too low a threshold. Many NFTs cost 1-2 million rubles each and if you take the art objects that museums sell now, even more so. This threshold should be increased to 2-3 million rubles.

In addition, every time I read about proposals for the regulation of cryptocurrencies, I understand that the legislators missed:

1) Responsibility for involvement in financial pyramid schemes using cryptocurrencies

2) Responsibility for the dissemination of information by bloggers, media persons and others about fraudulent projects / pyramid schemes that are already on the list of the Central Bank as fraudulent or having such signs.

It is also worth noting that criminal liability for OTC transactions can become an element of extortion and blackmail of digital assets.

As a CMS in chess, I will say the following – to win, you need to know the rules of the game, so reasonable regulation will allow many IT startups to come out of the shadows, pay taxes and honestly register their income.”

Whatever the views of experts on individual points, it is obvious that the draft law will require revision and correction. And the crypto community is responsible for participating in this historical process for the sphere.

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