Like many other jurisdictions around the world, Russia has recognized the potential benefits and risks associated with cryptocurrencies when it took the first step in identifying and encoding digital assets.

The new Russian legislation, called “On Digital Financial Assets”, sets a clear direction for dealing with cryptocurrencies and how individuals and legal entities can deal with it in everyday practice.

However, the new legislation may halt the activity of payment companies and fintech companies seeking to enter the Russian market. While Russia’s legal approach to cryptocurrencies – or digital assets as defined in the new law – has much in common with the UK’s regulatory approach to cryptocurrencies, the apparent ban on the use of digital assets as a means of payment clearly distinguishes British finance. . Conduct Authority (FCA) and Russia’s State Duma.

What is the new invoice?
To begin with, the long-awaited new Digital Financial Asset Act, or DFA, defines the term “digital assets” and their use. According to the translation by TASS, a major Russian news agency, the law defines it as: digital rights, a set of electronic data, including monetary claims, transferable securities and units in a non-public company with shares.

The bill also contains a partial list of DFA’s acceptable utility cases, with an explanation that they can be bought and sold, inherited or exchanged for other digital rights. But the possibilities are not limitless. It is clearly confirmed that digital currency cannot be used or advertised as a means of payment for goods or services, nor is it any form of Russian or other foreign currency.

Despite its limitations, the new legislation legitimizes the circulation and exchange of digital assets and establishes a set of rules for issuers of digital assets and exchanges that are included in the bill under the general term “digital asset operators” when traders and owners fall. In a separate category of “investors”.

No matter how much DFA use is allowed, the new law represents a major leap towards the adoption of cryptocurrency in Russia, as the State Duma in previous versions of the law considered a tone that was not suitable for cryptography and even criminal cryptocurrency activity. …

Taxation of encryption
The new legislation brings Russia in line with the UK tax authorities when it comes to taxing cryptocurrencies, and believes that digital assets are considered property in the eyes of the law, and therefore tax is imposed on them on an individual and commercial level.

A similar approach was taken by English courts in the AA case against unknown individuals, where cryptocurrencies such as Bitcoin (BTC) were recognized as property for the purpose of the law. In addition, Her Majesty’s Revenue and Customs collects capital gains tax on personal cryptocurrency investments and income tax if they trade cryptocurrencies in a commercial context.

It is unclear whether the Russian legislature will follow the same model.

What is the difference between the approach to Russia and the United Kingdom?
While the two regulators agree on how to tax digital assets and treat them as property, a closer look at the FCA’s definition of cryptocurrencies is beginning to differ.

FCA defines “crypto assets” as:

“Encrypted digital representations of value or contractual rights that use any form of Distributed Ledger (DLT) technology and can be transmitted, stored or sold electronically.”
This definition is limited to the triple classification of electronic money codes, security tokens and unregulated tokens.

The last category, unregulated tokens, includes all cryptocurrencies used as a means of exchange, which is explicitly prohibited in Russia. The FCA classifies this category as unregulated and remains true to these terms because it does not create a regulatory, licensing, or other compliance system for a company or individual to participate in the exchange of cryptocurrencies for goods or services. … while the Financial Conduct Authority (FCA) previously issued warnings about the infamous unorganized OneCoin token, it has since removed this warning, citing a lack of regulatory power for cryptocurrencies that influenced the decision to remove it.

However, the Bank of England, BOE, emphasizes that cryptocurrencies (unregulated currency codes) are not a currency. This is also evident in the shift in FCA terminology from “cryptocurrency” to the currently used “cryptocurrency”.

Source: CoinTelegraph