The Russian Ministry of Finance has proposed seizing from citizens funds whose provenance cannot be proven, for the benefit of the Pension Fund (PFR). The corresponding amendments to the Budget Code have already been submitted for government consideration, пишут Izvestiya.
The new rules could take effect as early as December this year. It is still unclear which agency will review citizens’ ‘suspicious accumulations.’ The minimum amount of funds that would trigger a review is also unknown.
Currently, the state confiscates only property if its provenance has not been proven. Funds seized from corrupt officials are transferred to the Pension Fund’s budget.
For cryptocurrencies, which have yet to receive official status in Russia, despite the recently enacted law “On Digital Financial Assets (DFA),” the situation is ambivalent.
Until Bitcoin is recognised as property, it cannot fall under the new bill. However, courts may interpret the provisions differently, warn ForkLog’s experts.
“The question of which property to regard as suspicious remains open. It is likely that official status for cryptocurrency will never be obtained, but the possibility of confiscation will arise after a court decision,” predicted Anatoly Knyazev, co-founder of Exante.
He added that amendments to the Tax Code recognise cash as property, which would allow confiscating it under the Finance Ministry’s new bill.
According to Sergey Troshin, CEO of the Six Nines data centre, the DFA bill introduces controls over the circulation of cryptocurrencies, and all buy/sell operations must be reflected in reporting.
“One can suppose that at some point all reports of cryptocurrency assets will automatically fall under Russians’ accumulations. If cryptocurrencies are equated with assets from which taxes must be paid, they will also come under the scope of all other laws,” explained the expert.
But even without legal status, cryptocurrency holders have reasons to be wary:
“Anything outside definitions may fall under the status of suspicious and be confiscated,” noted Sergey Trosin.
The mechanism for confiscating cryptocurrency requires clarification, adds independent expert Mansur Guseynov:
“I suppose the Finance Ministry’s bill may extend to cryptocurrencies as well, but there will be problems in the confiscation part. Physically seizing access to private keys from wallets will be necessary,” he told ForkLog.
Guseynov added that due to volatility, cryptocurrency cannot be considered a reliable store of value.
“But if you buy a stablecoin, for example, Tether, you get a bank-independent, convenient, liquid, and stable instrument. Plus, cryptocurrency assets are difficult to track.”
Experts expressed hope that the law, before taking effect, will undergo many amendments and clarifications.
Back in November 2019, the Ministry of Internal Affairs’ collegium instructed law enforcement agencies to develop a legal mechanism for seizing virtual assets for confiscation by the end of 2021.
In the Russian State Duma, this idea was described as a “legitimate and logical step by the authorities.”
Then, ForkLog experts said that confiscating bitcoins and other cryptocurrencies outside regulation could invite abuses.
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