We posed this one, and furher 9 sharp questions to Dr. Maria Agranovskaya, a practising expert in the Russian crypto legal jungle, an experienced international lawyer based in Moscow. She talks hard core crypto gestalt 🙂
(Q) are security tokens legal in Russia or not?
– there is no express answer since they are not regulated per se. Not prohibited but either we see no way to work within the legal framework.
(Q) if not, can you perhaps compare security tokens, and tokenized assets in general with any other kind of asset that enjoys a more defined regulatory regime in Russia?
– no, since “security” tokens are “security” under the law of each jurisdiction and the same token can be (non) security. Comparing is possible on case by case basics – looking at the assets / functionality.
(Q) do you think the Russian law will choose to define security tokens by an underlying asset or by a functionality displayed.
– the current legislative act defining tokens as a digital asset is yet in elaboration. The principles of referring a token to a certain class have not been given. It gives a more generic “digital asset” definition but it is yet far from ideal. We presume that securities laws shall be complied with when a token has all the security features listed in the Law. But we cannot guarantee what will be finally enacted- the practice of Switzerland is to define tokens based on underlying functions / assets but some other jurisdictions deal with “tokens” in general as a specific matter.
(Q) if real estate is tokenised in Russia, what are these tokens now from the legal point of view. Will the law recognise the rights of their owner to the property the token represents?
– we cannot comment at this point with enough certainty. Transfer of rights has to be formalized And so if it is via tokens, legal changes are necessary to render transaction valid. But such experience exists. Which does not per se impair the registers on Blockchain operation.
(Q) what about tokenized shares? Bonds? Debts?
– see above
(Q) how does the Russian law treat the concept of fractional ownership? May this treatment be transferred to tokenized ownership of, say, art?
– in theory , yes – depending on the type of assets. “Common” or “fractional” ownership can be possible.
(Q) What are the current trends, any thaw in sight? What shall we expect?
– STO are definitely a trend and big players wish to be digital to increase liquidity- real sector, mining, precious and other metals trade, real estate etc.
Art as well.
But in Russia we should work more with regional initiatives rather than await the federal solution – plus active involvement of regulators.
(Q) Malta, Lithuania, Switzerland have favorable legal regulations towards security tokens, while China has recently confirmed STOs are illegal and not welcome. Let’s place the Russian treatment of security tokens in the internstional context. Where is Russia globally on the legal treatment of security tokens
– not leading but the projects from Russia gain a lot of attention – we are all waiting for the progress.
(Q) will it be legal to do an STO in Russia? That is if a Russian company will try to raise capital this way?
– we cannot predict, I am a lawyer.
Depending on the way chosen some responsibility for non compliance with Laws may apply, including administrative and even criminal, for fraud, for example. The most difficult are tax matters and bank transfers.