Crypto- industry regulations in Russia

[KYCbench]

The orders of the Russian president to the government and the Central Bank to introduce the concept of “crypto-currency” into Russian legislation, given in October 2017, sparked optimism in the crypto community. However, the bill prepared by the Central Bank and the ministries is based on the false belief that it is possible to regulate crypto-economy as a new oil and gas field: impose restrictions on raising funds, motivating it with concern for future deceived investors, while removing restrictions for foreign investors.

For example, it is proposed to introduce taxation for miners, although mining is a process of generating program codes (crypto-currency), and if it does not exchange for classical (fiat) money, it is impossible to tax the process of mining with taxes. Taxation can only be a process of exchanging crypto-currency for fiat money. It is for this that the race of regulators is going on all over the world. The one who will offer the best conditions for this, meeting the requirements of anti-laundering legislation, will also collect financial and intellectual capital of the new digital economy in his country.

In addition, it is necessary to understand that mining is not so much a process of producing crypto-currencies, but rather a support for the operation of block-chain chains around the world. The country that will provide the best conditions for mining, for example, will gather 30-40% of its capacity, will receive a strategic win. A transaction can be initiated from anywhere in the world, but the provision of a chain lock depends on the resources of a particular country, not only about cheap electricity, but also about good laws. The country that will maximize this process will win. In the world, there is a flow of miners from China to Canada, the United States, Japan and South Korea. Russia is still losing this competition, although electricity is cheaper. Chinese miners often want to work in Russia, but they are stopped by the lack of clear rules and guarantees. Industrial mining could load our energy capacities, additional budget revenues and substantial investments in regions where there is a shortage of highly qualified jobs.

Russian Opportunities

A positive example of the regulation of the new sector of the economy is given by Belarus, where the decree “On the development of the digital economy”, defining the conditions for crypto-investors and the long-term responsibilities of the government, was issued. Physical persons in Belarus got the right to extract, store, exchange, buy, bequeathed and give to the crypto currency, and also engage in mining, which is not classified as an entrepreneurial activity and does not require a special license.

Russia could go the same way: to allocate several special economic zones, and enable them to create digital territories by the same rules. And create the appropriate infrastructure, of course, under the supervision of the Central Bank and with the participation of the Ministry of Finance.

Precedents for such solutions in the world already exist: Malta, Switzerland, Cyprus, Singapore, Estonia. These special digital territories do not presuppose the participation of crypto-economics in domestic life, but they will allow investors from all over the world to transfer their operations to them and pay taxes fairly, taking into account all requirements of anti-laundering legislation.

The problem of anonymity, which is so worried about the state, is solved very simply – by passing the authentication procedures of KYC by the owners of wallets, which in general is already an everyday practice for the crypto industry. KYCBench is one of the largest KYC players today, which is trusted not only due to compliance to the latest personal data protection regulations, but due to security and reliability in terms of anti-money laundering.

The introduction of a smart tax (automatically paid) when transferring crypto assets into classical money, for example at a rate of 5%, would be extremely positively received throughout the world and would make Russia the most attractive jurisdiction for crypto entrepreneurs.

There is only one way for Russia – to run twice as fast. Because Cryptoeconomy is primarily people. And if something does not suit them, they will just scatter around the world. Competences and technological projects will be developed, but not in the Russian jurisdiction.

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