Russia: toward more crypto-friendly regulation?

On Tuesday, the Kremlin approved a bill in the Duma that would exempt those working with crypto in Russia, directly or indirectly, from paying VAT value tax. The bill would also include a tax rate on income from gains due to cryptocurrency sales.

Putin’s Russia appears to be pro-crypto

Putin’s country has historically always been hostile to the crypto world, but since the start of the special operation in Ukraine this concept has been turned on its head. 

The ongoing operation in Eastern Europe has been roundly condemned by the international community. Overall, the United States of America and Europe, but also the United Kingdom and Australia, have imposed countless duties and sanctions on the trans-continental country. 

The punishment by the international community has been both economic, with trade restrictions, ouster from SEPA, freezing of assets, accounts and resources of oligarchs at home and abroad. As well as energetic, by blocking most oil and gas exports, which for the Kremlin turned out to be a strategic asset. 

This initial major impasse led the country to seek new solutions, such as selling excess energy resources to neighboring India and China or forcing those still buying resources from her to pay in rubles. The real flywheel for Moscow’s economy was the resources it did not have before, leading to new revenues. 

This second type of resources came about by turning its gaze to the crypto world, which was for the first time a major player in a war scenario. On the Ukraine side with the handout of billions for the purchase of food, medicine, and so on. From Russia’s side with the attraction of more and more capital as a result of government simplifications, an open mindset toward this world, the widespread possibility of accepting cryptocurrency payments, and last but not least, taxation that could then be more crypto-friendly. 

The new taxation for crypto operators on Russian soil

What happened on Tuesday with the passage of the bill is the icing on the cake of a path still a long way from coming to a halt, which has led Putin to implement ad hoc taxation for those who issue digital currencies or operate directly or indirectly in the crypto asset sector.

Under the new law, the 20% taxation for those issuing cryptocurrencies would become 13% for Russian companies and 15% for foreign companies operating on Russian soil in the crypto world. 

It turns out that this taxation, taking away some cases like Switzerland or Dubai, is one of the best in the world and a huge driver for attracting capital from abroad. 

It is a well-known fact that the sanctions on the continental country have been a boomerang and although they have put a momentary stick in Russia’s wheels, they have been instrumental in getting it to reorganize with greater vigor than before, finding new and greater resources, including those in the crypto world. 

Regulation in Russia

In February, the regulator granted the blockchain platform Atomyze in Russia its first license to exchange digital assets, which was followed by a license application for the dominant lender Sberbank.

All these activities fall under the new fee schedule and enjoy the benefits expressed above. 

Within this climate of outstretched hands in the world of digital currencies is the St. Petersburg court ruling that now recognizes crypto as a means of payment in Russia:

“It is not a means of payment on the territory of the Russian Federation, therefore it cannot be recognized as an object of civil rights and a subject of crime”.

This is what was explained in the margin of the ruling in reference to crypto and which led to the de facto recognition so it can be legally acted upon. 

According to Anatoly Aksakov, Head of the Committee for Financial Markets of the State Duma, during the Moscow Academic Economic Forum, Russia may issue the first blockchain-based digital assets very soon.