New experimental legal regime for cryptocurrency transactions
As instructed by the President of the Russian Federation, the Bank of Russia has submitted its proposals for regulation of investments in cryptocurrencies (digital currencies) to the Russian Government for discussion.
The regulator proposes permitting a limited number of Russian investors to buy and sell cryptocurrencies. To this end, the Bank of Russia plans to establish a special experimental legal regime for three years.
Under this regime, cryptocurrency transactions may be conducted by ‘especially qualified’ investors only. This is a new status. It may be granted to individuals whose investments in securities and deposits and last year’s incomes exceed ₽100 million and ₽50 million, respectively. The experiment is also supposed to involve companies that are qualified investors under applicable law. As for financial corporations willing to invest in cryptocurrencies, the Bank of Russia will set regulatory requirements based on the level and nature of the risks associated with such assets.
The introduction of the experimental legal regime is aimed at improving transparency of the cryptocurrency market, setting standards for providing services in this market, and expanding investment opportunities for sophisticated investors with higher risk appetites. The Bank of Russia has made multiple statements that private cryptocurrencies are neither issued nor guaranteed by any jurisdiction, are based on mathematical algorithms and susceptible to extreme volatility. Therefore, when deciding to invest in cryptocurrencies, investors should realise that they take a risk of losing their money.
The Bank of Russia still does not regard cryptocurrencies as a means of payment and hence proposes to simultaneously impose a ban on settling cryptocurrency transactions between residents outside the experimental legal regime and establish liability for breaching this ban.
The policymaker intends to permit all qualified investors to invest in derivatives, securities, and digital financial assets, which do not involve delivering cryptocurrencies to investors but whose returns are linked to the cryptocurrencies’ value, outside the experimental legal regime.