Among all of the news widely covered in the modern press, one has attracted a special amount of attention, this is the topic of cryptocurrency, which we will discuss in this article. The issue of legal regulation of cryptocurrencies is becoming increasingly more acute all over the world, while different countries adhere to various approaches, rich in their diversity, starting from complete prohibition of the initial coin offering, as well as the turnover of bitcoins in general (Thailand), or ending its full legalization (Belarus).
Considering this background, the existing legal uncertainty of the cryptocurrency in Russia is perceived as something typical of the current situation. However, with the increase in the turnover of cryptocurrencies, the need for concrete action has increased and on October 24, 2017, Russian President Vladimir Putin has instructed the Bank of Russia and the government to develop regulations in regards to cryptocurrencies, mining and initial coin offering and to make appropriate changes to the legislation before July 1, 2018. As a result, the State Duma of the Russian Federation is considering two federal law bills that are directly related to cryptocurrency regulation in the territory of the Russian Federation:
1) Bill “On Digital Assets” as a variant of strict regulation
The document defines cryptocurrency as a type of digital financial asset that belongs to the property, it is stated that the asset is not defined as a means of payment (in other words, it’s not equal to currency/legal tender). Transactions with cryptocurrency are supposed to be carried out through special market participants – operators of digital financial assets exchange.
2) Bill “On the Amendments to the First, Second and Fourth Part of the Civil code of the Russian Federation” as a variant of vague regulation
The document contains a definition of digital currency as a set of electronic data (digital code or reference), which doesn’t certify the right to any object of civil rights, but under certain circumstances prescribed by law can be used as a means of payment. The Bill also contains a digital rights definition, which is regarded as a unique digital code or reference, that makes it possible to read the description of the relevant object of civil rights at any time.
It’s evident from the bills’ description that the concept of cryptocurrency causes a solid number of disputes and contradictions even at this stage of its consideration in the State Duma, therefore, there is a possibility that the aforementioned bills may require some refinement in the future.
To understand the current situation, we may refer to the current judicial practice, as recently, a landmark decision was held in the bankruptcy case against Ilya Tsarkov. One of the key issues considered by the court was the possibility of the inclusion of bitcoins from the cryptowallet on the site www.blockchain.info in the bankruptcy assets. The finance manager insisted that bitcoins were property, thus, should be included in the bankruptcy estate, the representatives of the debtor subsequently stated that bitcoins are not subject to civil rights and therefore cannot be attributed to the property of the bankrupt.
Following the results of case consideration, the court supported the last position and refused to include cryptocurrency as among the bankruptcy assets. At the same time, the decision was based on the fact that while the concept and legal nature of the cryptocurrency, as well as the order of its circulation, does not have an appropriate reflection in the law, it is impossible to determine what category it should be classified as. Consequently, the court was not in a position to settle the matter on its own, nor it was able to apply the rules by analogy.
Thus, despite the close interest and growing turnover of cryptocurrencies, in most cases, cryptocurrency is regarded as remaining outside of civil law until the moment of its final regulation. D’Andrea & Partners will continue to monitor news about this topic, and if you have any questions about cryptocurrency turnover in Russia and China, please don’t hesitate to contact us via firstname.lastname@example.org.