Michail Uspenskiy, a partner in Taxology. Ru, has 14+ years experience in tax consulting to multinationals and Russian corp. Prior to Taxology, was Head of Tax Practice and Partner in a Moscow based law firm. His profile includes digital rights and blockchain, a rare experience in Russia. Digital Asset Live Editor-in-Chief talks with Michail Uspenskiy about now and near future for legalities in Russian blockchain adoption:
Q1: Michael, most our readers are not from Russia. To them, a short update on the digital legislation of the Russian Federation at the moment. What is possible, what is impossible, what is semi-possible?
A1: Recently, Amendments to the Civil Code on were adopted. I call that m Matreshka amendments, after the Russian doll. Tokens are now called “digital rights”.
However, digital rights are only those directly specified in the law. This law is likely to be adopted by the end of the year.
Further, Central Bank of Russia will pass special regulations. Hence, for the time being, Bitcoin, Ether and other cryptocurrencies are formally in the gray zone.
Q2: The amendments to the civil code with definitions of digital rights will enter into force in October of this year. Further, it seems that some sectoral laws, practices, including judicial ones, are needed? What waits us in this area in the near future, of important and interesting events or trends?
A2: The most important step is to adopt the Law on Digital Financial Assets, but it is stuck in the State Duma [Russian Parliament].
The key problem is that the government and the Parliament cannot agree on classical payment tokens. But even if legalized, its turnover will be tightly regulated. An option to buy a cup of coffee for Bitcoin you are unlikely to see [in Russia – Red] in the next five years.
Q3: Is it possible to tokenize a house in Russia now? Land Plot? Stock? Art? What assets can? If possible, with precedents.
A3: Currently, asset tokenization can be conducted according to the general rules of civil law. In tokenization of stocks and real estate problems will definitely arise. Their turnover is strictly regulated and requires mandatory registration of rights transfer: in a special depository AND/OR at the state register.
Meanwhile, a law on crowdfunding passed the third reading, and it will allow, inter alia, issuance of utility tokens.
So far the most famous (and probably the only) example of tokenization in the Russian Federation is loyalty points programs. By a surprising coincidence, this project was carried out by a team of lawyers under my management last year. Moreover, the prosecutor’s office filed a lawsuit against us, which we successfully repulsed in court.
Q4: Let’s assume you and I have one of the permitted assets. How to tokenize it?
A4: The recipe is simple: enter into a civil contract. As soon as the relevant laws come into force, tokenization will take place according to them. For now, it is my strong belief, a competent contractual structure is enough.
Q5: What is needed to create an exchange of Russian digital assets?
A5: Oh, this is clearly not a question of today. First you need to adopt a law on digital financial assets. As a person familiar with the process, I assure you that the licensing of exchanges and exchangers will be held according to special Central Bank regulations. The timing of their release has not even been discussed.
Q6: What topics in the current Russian legislation on digital rights and practice have not yet been resolved? What are the main solutions for them presented? How do you see the best solutions?
A6: Our major current challenge is to give a clear definition to payment tokens issued on open blockchains and to regulate their turnover. Personally, I am convinced that it is imoractical to completely ban bitcoin and similar coins.
However, their legalization has to go smooth and gradual. Therefore, I support the initiative that will ensure purchase of cryptocurrencies only with licensed sites, that comply with AML rules, as well as [the introduction – Red] of threshold for unqualified investors (at least in the first one two years).
Q7: I recently gave a talk on the Going Ecosystem of Digital Rights at one conference. I described the situation there by countries and formats of decisions. And the first question I was asked was “How far are we behind the West?” How would you answer this question?
A7: Russia has a rather complicated legal system, and the introduction of new legal crypto regimes into it takes place, in my opinion, in the “normal” mode.
We have already adopted amendments to the Civil Code, some court practice has appeared, a number of letters of the Ministry of Finance on Bitcoin taxation have been issued, a second hearing has been scheduled on the draft Law on Digital Financial Assets.
Russia is definitely moving forward in crypto issues. Stay tuned!