Russia’s Bitcoin Advocate Says There Is No Sense to Adopt Cryptocurrency Legislation that Would Hinder Businesses

This spring an interdepartmental working group on cryptocurrencies in Russia has started working on a bill that would legalize cryptocurrencies in the country. There are numerous rumors and talks concerning this paper, however, nobody actually has any reliable and systematic information in this regard.

For that reason, ForkLog talked with Elina Sidorenko, the head of the working group and a MGIMO professor, to find out about the most recent developments concerning the bill. She spoke about the plans to launch an analytic center and private exchanges where one could legally exchange cryptocurrencies for rubles and vice versa. She also confirmed that the government does not plan to tax cryptocurrencies.

ForkLog: You probably know everything related to the cryptocurrency regulation bill, and what businesses and users should expect from it.

Elina Sidorenko: That’s true, though for now I can’t speak about all the details. I can outline our goals, though. We started working on the bill in early spring. Our interdepartmental group, which includes representatives for numerous ministries and departments, the bill’s text is currently being finalized. When it’s done, it will be submitted to all departments.

FL: When do you expect it to happen?

E. S.: This September or October, when the parliament returns from their vacations. We plan to file it at the autumn session. But before that, we’ll send it to the ministries and departments, and present it for an open discussion so that all market players could express their view on its contents. We might also hold a special event like that conference in the format of a dialogue between businesses and authorities.

FL: Who’s in the working group? Who’s writing the bill?

E. S.: The group includes representatives for the parliament, including the initiative’s originator Andrei Lugovoi. We also cooperate with other parliamentary committees. Aside from that, there are representatives for the central bank and the financial monitoring service. The technical standardization issues will undoubtedly be reviewed in cooperation with the Federal Security Service because cryptography issues are in their area of expertise.

FL: What will this bill be about? At least as an outline.

E. S.: The bill will be a framework. Therein, we define the nature of cryptocurrencies and their status, as well as basic principles for the cryptomarket operation. Other provisions will be mostly referential. We don’t try to create an enormous and viscous law that defines all parameters of a new market right away. Creating such a law would just hinder the market.

We have no idea which way the market is going to take. We don’t know how 2017 will end, what will happen to all those ICO’s that currently may cause the market to collapse and change the very approach to estimation of cryptocurrencies. Our task now is to give some confidence to the market players and take the Japanese path.

As you might recall, April 1st they passed the bill that recognizes cryptocurrencies as a legal tender, but it was only May 25th when the status of market players and the procedures for their legalization were determined. In Russia, those questions will also be solved in a sequential manner. First we give some guarantees to the market players, then see the market’s reaction, and then start optimizing regulations for its needs. Not the other way round.

FL: How will the government define players? Will there be KYC provisions in the bill? This question is widely discussed in the community because once you said that miners, as long as they mine cryptocurrencies, are of no concern for the government and law enforcement, but there might be questions once they try to cash their coins.

E. S.: What I meant was the interest of the government, not the law enforcement. That’s a different thing. We have had KYC for a long time, and it’s mandatory not only in Russia. It’s the requirement of the FATF.

Once an amount reaches a certain level, market players have to be identified. In Russia, this limit is currently 15 thousand rubles for e-wallets. Aside from that, there are certain limits for individuals and companies regarding bank remittances and other activities. Why should we make an exception for cryptocurrencies? Japan doesn’t want to make the market completely anonymous either. If we create a legal and economic platform for businesses, we have to comply with the FATF. Japan, Singapore and Switzerland can’t ignore them as well.

In fact, all this hype around ‘oppressive Russia’ has no grounds. All countries live in the same world and comply with the same laws. Every country has a financial intelligence service that answers for compliance with the FATF’s 44 recommendations with its life.

FL: So, technically, it would look as follows: in order to make work in Russia easy for businesses, they’ll have to register a wallet openly associated with the business in order to be identified by the government. In the future it might be useful for taxation. Is it right?

E. S.: There’s no taxation on the table right now. It’s important to understand what’s going on in our country. It’s important for any country. If a person wants the government to be able to protect them, they’ll have to accept those rules. For instance, a company collapsed after an ICO, and who’s going to protect the company and its investors? American jurisdiction? Of course, not. All those companies that go to Singapore don’t understand that its legislation is as strict as in the U.S. So companies with dubious ICO’s based there have to understand that if their business goes south they’ll interact with the Western jurisdictions directly. And they, to say the least, would not be very friendly about such business.

As for the question of wallets, yes, we have to have a way to identify a person and, most importantly, a company. However, we’re only thinking about how to do it. What’s very important to us is the market player’s entry to an exchange platform, and it will be stipulated in the bill.

FL: Tell us about those platforms. Will they be public or private?

E. S.: There will be many private platforms. Most likely, they’ll have exchange elements. The same requirements that apply to brokerage companies will apply there, too, though it’s not for sure. We have a law on stock markets and currently we see no problems in applying its provisions to all market players. Again, it’s all being developed right now. What I can say for sure is that there will be no state monopoly in this area.

There’s no sense in a law that hinders businesses. If we wanted to do that, we’d just leave it as it is. This business would have understood the risks of a legal vacuum. Our goal is to give new energy to businesses, to create a new Japan, a bridge between the East and the West. We want to attract foreign investment. If we create Russian exchange platforms, it’s clear that they will exchange cryptocurrencies for rubles and vice versa.

FL: The project for digital economy states that there will be some regulatory framework that ensures application of blockchain. Are you working in this area as well?

E. S.: Blockchain is a technology. One can’t regulate a technology. Our task is to define cryptocurrency, introduce it to the legal terrain and outline the basic direction towards legalization of cryptocurrency-related businesses.

FL: That’s good news. How do you estimate the bill’s chances to pass without some restrictive amendments?

E. S.: I can’t tell. We just do our job and hold serious events to communicate our positions. There are some troubling trends now, and I hope that they won’t influence the final decision on our issue by the authorities. Nobody knows what to expect: it could be market expansion, or collapse of major ICO’s that could have negative effect on the cryptocurrency market and the regulation. If everything goes well, I see no problems for our bill.

FL: Do you know how is the idea of a national cryptocurrency doing?

E. S.: As far as I know, the idea has been abandoned. It first appeared in 2014 and was actively discussed at our platforms, among others. However, now we see no need to create such a cryptocurrency. The accent has shifted to the Masterchain, a technology that is being actively tested by central banks and in interbank cooperation. Banks and governments truly embrace Masterchain. This technology has a great potential for something like that.

FL: It’s quite interesting that different sources talk differently about the national cryptocurrency. For instance, attendees of the recent banking conference in St. Petersburg are sure there has to be such currency, while the minister for industry and trade has even stated that it’s being tested. It may seem that the government lacks consensus in this regard.

E. S.: There’s no consensus, you are right. For that reason, we came up with an idea to create an association or an analytic center that could unify all existing companies, organizations and associations to create a reliable channel for communication between businesses and authorities. There are lots of those who want to sign up in our expert group, but it’s only an interdepartmental group. Once such a center becomes operational, everyone interested in developing blockchain and cryptocurrencies in Russia could join. The center will be engaged in analytics, ICO assessment, advanced training, and smart contracts studies.

FL: One more question. We all know that business in Russia are gradually embracing bitcoin, and there are shops, restaurants and exchanges that now accept it. It seems that the law enforcement bodies in most cases aren’t very worried about it. Is it a good sign?

E. S.: Yes, though you should realize that they don’t do anything because there’s no regulation. Businesses are in legal vacuum, though they have to keep track of changes in the legislation. As soon as the regulation is introduced, those businesses who want to be legal will have to change their operations. In some cases, those changes will be minimal, like registering as an individual entrepreneur or creating a specifically registered wallet to accept payments.

Presently, businesses have a unique opportunity to operate in a legal vacuum and realize whether it’s economically sound. We, on our part, will do our best to create advantageous conditions. If you don’t sell drugs, weapons, and don’t work in the darknet, the legislation will make things much easier for you.