The State Duma expert council recommends finalizing a draft on cryptocurrencies

5 June 2022

The website of the State Duma reported that the draft would be amended by the position of the country’s Central Bank.

The decision to recommend revisions was made after a working group meeting on the legislative regulation of cryptocurrencies chaired by Doctor Alexei Gordeev, a deputy from the Voronezh region with a Ph.D. in economics. Many meetings before that confirmed the position of the expert council’s support of the Ministry of Finance’s approach to regulating the cryptocurrency sphere. Nevertheless, they noted that the draft law requires further work. A significant part of it will be recommendations from the Central Bank regarding regulating cryptocurrencies in the country.

What exactly does the expert council suggest?

Council members believe requirements will get set for currency holders to reduce the risks of losing investments due to the high volatility of cryptocurrencies, including the historically low bitcoin rate drop, cyber threats, and fraudulent activities. The law would refer to them as licensed entities authorized to transact in digital currencies. Interestingly, digital currency is not a cryptocurrency but a full copy of a country’s fiat currency. That, for example, is how the digital ruble would behave. However, perhaps the wording in the law or the definition of the boundaries of the term “digital currencies” will still be changed.

Among the requirements for cryptocurrency-holding companies could be permanent registration in the country, proven financial strength, a user-accessible list of management, and secure information systems that meet certain standards. Additionally, the expert council proposes dividing crypto traders into qualified and unqualified investors, similar to the stock and over-the-counter markets. For example, some transactions are only available to certified “quals” who manage large sums. In the crypto market, if it follows the same path, individuals who are not considered qualified investors will also not be allowed to carry out any number of complex transactions that require expertise.

Another proposal by the expert council is to classify mining as a business activity. That would entail the setting of special electricity tariffs. In turn, it would require a definition of “household energy consumption” because, currently, such a term does not exist in the country’s legal framework. However, as members of the expert council note, this is necessary to create commercial tariffs and improve industry regulation.

Shortly, the expert council’s proposals will be submitted to the government. Moreover, a draft law “On the regulation of digital currencies (cryptocurrencies)” is currently under consideration. Bank of Russia is one of the participants. The bill is expected to be submitted to the State Duma before the end of the spring session.