Govt agencies arguing over idea of a ban on organizing circulation of digital currency in Russia - source

MOSCOW. July 4 (Interfax) - The Ministry of Finance proposes to ban the organization of the circulation of digital currency in Russia, making an exception only for miners who want to sell it and stablecoins who want to equate it with Digital Financial Assets. The law-enforcement bloc opposes it because of fears that the wording proposed by the ministry would lead to legal uncertainty.

The Ministry of Finance has prepared amendments to the parliamentary bill establishing the legal regime for mining, a source familiar with the situation told Interfax. This bill (N237585-8, On Amendments to the Federal Law "On Digital Financial Assets, Digital Currency and on Amendments to Certain Legislative Acts of the Russian Federation") is not yet on the calendar for consideration in July, or published on the website of the State Duma. Law enforcement agencies and the Ministry of Finance have fundamental disagreements on the draft law, the government source said.

The Ministry of Finance proposed a new version of Article 14 of the law "On Digital Financial Assets, Digital Currency", which regulates the circulation of digital currency, the source said. According to its current version, transactions for the purchase/sale, circulation and issue of cryptocurrency are currently permitted in Russia. It is expressly prohibited to use cryptocurrencies only as a means of payment and only for tax residents, as well as to advertise payments using cryptocurrencies. Officials have repeatedly compared the rules for working with cryptocurrencies in Russia to using the dollar, where you can buy and sell, but payments are prohibited.

The draft law prepared by the Ministry of Finance introduces Art. 15, paragraph 8, according to which the organization of the circulation of cryptocurrencies is prohibited in Russia with an exception for miners.

"In the Russian Federation, it is prohibited to organize the circulation of digital currency, with the exception of the organization of the circulation of digital currency in terms of mining (including participation in the mining pool)," the amendment prepared by the department reads.

The 'organization of the circulation of digital currency in the Russian Federation' is understood as activity for the provision of services aimed at ensuring the completion of civil transactions or operations that entail the transfer of digital currency from one holder to another, using the Russian information infrastructure, that is, virtual and real crypto exchanges, or crypto ATMs.

Two law-enforcement bodies immediately opposed the idea from the Ministry of Finance. "The projected changes to Article 14 of 259-FZ actually introduce a ban on organizing the circulation of digital currency, the validity of which, in our opinion, should be confirmed by specific arguments; in other circumstances it requires additional discussion," the conclusion from the Investigative Committee says. According to the department, the use of the wording proposed by the Ministry of Finance is fraught with confusion between the two concepts "prohibition on organizing circulation" and "prohibition on circulation," which can lead to legal uncertainty. "We believe that the establishment of a ban on the circulation of digital currency can contribute to an increase in the size of the shadow economy and an increase in crime, especially fraud, as well as a destabilization in economic relations," the Investigative Committee said.

"The definition of the organization of circulation of digital currency in the Russian Federation should exhaustively reveal all the features of this process and requires additional discussion," the FSB said in response to the Finance Ministry's idea.

It is assumed that the Finance Ministry's proposed ban will not affect stablecoins. According to the source, during the discussion of the amendments, the FSB insisted on updating the definition of digital currency, taking into account the recognition of cryptocurrencies in a number of countries as an official monetary unit, as well as the need to include secured cryptocurrencies as a subject of regulation. "It is necessary to send a corresponding instruction to the Bank of Russia in terms of equating stablecoins with digital financial assets," the Ministry of Finance said in response.

DFAs are more liberally regulated in Russia, and their release and circulation are permitted by law.