Fortunes have been earned and lost in the dealing of virtual currencies since the bill “On Digital Financial Assets” was passed in Russia in 2018, and back then, there were only laws prohibiting their usage, but no laws regulating them. Eventually, the increased use and acceptance of digital currencies by consumers, and the boom of investment opportunities in the latter half of 2018 and early 2019 prompted, along with the increasing international-push towards setting regulatory regimes for digital assets prompted the law to undergo upgradations.
This week, the Russian regulators have introduced a new “digital rights act,” clarifying cryptocurrency usage, and officially defining “smart contracts.” This has been published as a piece of an ongoing effort to harden the rules around digital assets.
The head of the State Duma’s legislative committee, Krasheninnikov commented:
“The law addresses the issue of legalizing the collection and processing of significant arrays of anonymized information (big data). Basic norms are being fixed for regulating the circulation of digital rights and, very importantly, judicial protection of the rights of citizens and legal entities arising in the relations of the digital economy will be provided.”
Initially, Smart Contracts were defined as-“contracts in electronic form, under which the performance of rights and obligations is effected by the automatic transfer of digital transactions,” and allowed them to be used by investors to enter into contracts during initial coin offerings(ICOs), but the new law has set better-defined norms for their usage.
According to local media reports, the law presented on October 1, 2019, specifies the legal treatment appropriate for digital assets, and smart contracts, and introduced the concept of “digital rights” into the Russian legislature, for the first time.
The law has stated that digital rights will be treated equally like other contractual rights or securities. Digital assets would be considered as assets within the Russian civil legislation and will be governed by the civil law.
In the Russian Federation, for something to be regulated legally, it must be inscribed into the country’s civil code, so if something is not in the civil code, no legal protection is given to it by the governing authority.
With the new law, administering a smart contract will be treated in the same way as an automated payment used by a mainstream bank. It has mandated the attachment of identity information (name of the digital right owner, and parties involved in the contract) to each transaction.
Earlier, the Federation had implied to ban cryptocurrencies, and fearing its possible usage in criminal activities, and its impact on the financial system, the lawmakers have been hesitant to adopt them completely, That negative attitude has since been revoked, and the Russian authorities seemed to have warmed up to the concept of regulating the sector firmly.
Reportedly, the Russian government is also analyzing two other bills; one on attracting investments using investment platforms, and another on digital financial assets. If they are accepted and adopted, these bills, together with the newly imposed Law, should solve most of the regularity uncertainties for the digital asset communities in the country.