Mining without rewards and prison: what Russia’s amendments to the Law on Digital Financial Assets mean

The Russian Ministry of Finance has sent to other agencies the text of amendments to the Law on Digital Financial Assets (DFA), regulating the circulation of cryptocurrencies within the country. ForkLog obtained a copy of the document from an informed source.

Amendments to the Law on Digital Financial Assets by ForkLog on Scribd

The ministry proposes to ban the circulation and issuance of cryptocurrency, except for its transfer by inheritance and collection within the framework of bankruptcy and enforcement proceedings.

The use of digital currency by third parties, the manufacture of mining equipment, and operations in foreign information systems are not prohibited.

“The receipt of digital currency as payment for these actions is prohibited,” the document states.

This clause is drafted unclearly and allows for varying interpretations, said Dmitry Kirillov, a senior lawyer in tax practice at Bryan Cave Leighton Paisner (Russia) LLP and lecturer at Moscow Digital School.

“Applying it to existing forms of crypto business, one can conclude that Russia does not prohibit mining foreign cryptocurrency in a broad sense, whether as solving computational tasks (mining, for example, Bitcoin) or as block validation (staking, for example, EOS). The use by third parties mentioned in the norm is, in essence, validation, since it confirms transactions of other users,” explained the lawyer in ForkLog’s commentary.

Kirillov called this approach a paradox, saying that miners are effectively deprived of rewards.

The issuance and circulation of digital rights and digital currencies outside Russia’s information infrastructure, linked to large profits, are punishable by a fine of up to 1 million rubles or imprisonment for up to four years. For especially large damage, violators face up to seven years in prison and a fine of up to 1 million rubles.

Illegal circulation of digital financial assets is punishable by a fine of up to 100 thousand rubles for individuals and up to 1 million rubles for legal entities. Accepting payments in DFAs risks confiscation and a fine of up to 50 thousand rubles for individuals and up to 500 thousand rubles for legal entities.

Among the recipients of the document are the Ministry of Digital Development, the Ministry of Justice, the Ministry of Internal Affairs, the FSB, the Federal Tax Service, Rosfinmonitoring, the Prosecutor-General’s Office and the Investigative Committee of the Russian Federation. It is expected that the aforementioned agencies will provide comments on the amendments by the end of September 4.

Earlier ForkLog reported that the amendments prepared by the Ministry of Finance prohibit miners from receiving cryptocurrency. Experts warned that this would kill Russia’s cryptocurrency market.

The Ministry of Finance first spoke of the need to introduce criminal liability for the turnover of cryptocurrencies in September 2015.

In May 2020, bills on administrative and criminal liability for violations of the rules on dealing with digital currencies were submitted for consideration to the Ministry of Economic Development.

The Law on DFA was enacted at the end of July. It recognises cryptocurrencies as property and bans using them to pay for goods and services within the Russian Federation. The document will take effect on 1 January 2021.

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