Investment caps and court-voided trades: analysis of the ‘Digital Currency’ bill

The text of the ‘Digital Currency’ bill regulating the circulation and issuance of cryptocurrencies in the Russian Federation, as well as the operation of exchanges and exchangers, has been made publicly available. ForkLog provides an analysis of the bill’s main provisions. 

Main provisions

The bill equates digital currency with property and prohibits its acceptance by legal entities and individuals as a means of payment. 

Users will be able to buy and sell cryptocurrencies for rubles only through licensed exchangers and exchanges. They are listed in the document as the operator of a digital currency exchange and the operator of a digital trading platform.

Operations with digital currencies are permitted only under the condition of using certified electronic wallets. For certifying the wallet address, the address must correspond to the electronic signature key.

Operators of exchanges and exchangers

To operate in the Russian Federation, operators must register within the country and obtain a license. It is issued for an indefinite term but may be revoked on the basis of the licensee’s written application, or in case of violations on their part.

According to the document, operators must:

• prepare annual reporting and have it audited;
• keep information about trades;
• appoint a designated person or form an internal-control service;
• establish a risk-management system.

Exchanges must maintain registries of trading participants, orders and deals. Information in the registry of digital currency holders is to be stored indefinitely.

Clients’ funds must be held on a nominal account opened by the operator at a Russian bank.

Users may deposit funds to the exchange only by transfer from a bank account opened in the Russian Federation. The trading platform must maintain the accounting of clients’ funds held on the nominal account.

The minimum own funds for an exchange must be at least 100 million rubles, for an exchanger at least 50 million rubles. 

Regulator

An authorised body will regulate the operators. The document does not specify which agency. It is responsible for issuing and revoking licenses, establishing and monitoring compliance with requirements by operators, and determining restrictions on the list of digital currencies with which trades may occur.

At the same time, staff of the authorised body have unfettered access to the premises of operator companies, as well as related organisations for inspections.

The regulator may also suspend trading on a platform for up to six months in case of non-compliance with rules, laws or other violations.

Investor testing

Before purchasing cryptocurrencies, individuals will be required to undergo testing to assess their \”experience and knowledge\”, as well as how well they understand the \”risks of acquiring digital currency\”.

The list of questions and the procedure for testing will be established in a separate subordinate act.

Non-qualified investors who pass the testing will be able to purchase cryptocurrencies up to 600 000 rubles per year. In case of failing the tests, such investors may reapply to purchase digital currencies, but with a mandatory acceptance of cryptocurrency-related risks and a limit on investments of 50 000 rubles.

Qualified investors are included in a special register; for them there are no limits.

Within six months, but no later than that, a completed transaction may be declared invalid by the court.

Mining

The document defines the concepts of mining, mining pool and data centre.

Upon obtaining cryptocurrencies, miners must notify the tax authorities. Individuals engaged in mining are not required to register as individual entrepreneurs if \”the energy consumption in carrying out such activity does not exceed energy-consumption limits\”.

Data centres can be owned only by Russian legal entities; they are included in a special register. The authorised body will also maintain it.

Seizure of cryptocurrency and bankruptcy

After receiving a court order to seize a user\’s cryptocurrency or funds, the exchange must halt operations with these assets. 

If bankruptcy procedures are initiated against the client, the exchange may close open orders as of the arbitral court\’s decision to begin insolvency proceedings. Funds and cryptocurrencies remaining after the orders are fulfilled are returned to the user and may be included in the bankruptcy estate.

If adopted, the Digital Currency law will take effect on 1 January 2023. 

As reported, the bill was developed on the basis of the government-approved concept for regulating the crypto industry. 

Earlier, the Bank of Russia presented its own proposals on cryptocurrencies and sent them to the Ministry of Finance. They envisage a total ban on Bitcoin and fines of up to 1 million rubles. 

In the ministry, they said that the Bank of Russia\’s proposals will be taken into account in further work on the bill \”to the extent that they do not contradict the ministry\’s approaches\”.

Законопроект о цифровой валюте (Минфин) by ForkLog on Scribd

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