Kremlin Representative Presents Drafts On Cryptocurrency Regulation To Russian Bank

Reports from Moscow on November 6, 2017, indicate that Kremlin business ombudsman Boris Titov presented regulatory approaches to both the Bank of Russia and Ministry of Finance regarding blockchain, cryptocurrency technologies, and the operation of cryptocurrency trading platforms.

As reported, he expressed that "it is necessary to draft laws and expand Russian jurisdiction in this dynamically developing field, in particular, in order to prevent unwarranted interference of law enforcement authorities in business activities involving the use of blockchain technology."

While the reports say Titov affirmed that miners of cryptocurrencies may indeed be taxed, authors of the proposal cited their concern for investors, noting that “the focus should be on the protection of investors rather than the pursuit of some fiscal interest and the imposition of taxes."

The draft regulation was developed by the PA Stolypin Institute of Economic Growth, of which Titov is Supervisory Board chairman. According to the institute's concept as reported by Taas, "the crypto currency is a monetary means that is not monetary value nominated in the currency of the Russian Federation or foreign countries, created and transferred using blocking technology and used by an unlimited number of persons to make transactions. At the same time, electronic money, as well as tokens issued within the framework of ICO (attracting financing in existing crypto-currencies in exchange for future tokens) are not recognized as a crypto currency."

The draft has circulated among various Russian financial institutions, according to Titov:  "We have already sent proposals to the Central Bank, Sberbank, the State Duma, and the Finance Ministry. We will convene another round table in which we invite representatives of these organizations and they will express their opinion on this matter." He also indicated that the institute will move "ahead of schedule" even though President Putin makes the final calls on cryptocurrency and crowdfunding.

Titov proposed a three-pronged approach to legislating blockchain-based currencies: first, to define cryptocurrencies and blockchain technology in a legislative sense. Second, to establish a means of circulation governed by rules in a so called "first-exchange circuit." Third, based on the results of the first two approaches, new financial technologies would be plied within a "regulatory sandbox" so that practical rules could be then applied to blockchain-based transaction activities, including mining, token offering based crowdfunding, and the like.

According to Titov, bitcoin and Ethereum will not be considered during the initial tests, because the decentralized currencies do not have an “emission center.” However, it is likely that the "regulatory sandbox" phase under the supervision of the Bank of Russia will include testing of the cryptocurrencies and technologies that don't fit "first exchange-circuit" criteria.

Minimum capital requirements of the "emission centers" proposed by Titov are explained as a bid to extend protection to investors and marketplace participants. The “emission centers” will be expected to fall in line with various security requirements, KYC standards, as well as anti-money-laundering regulations which, as reported, are to be "substantially simplified for such companies."

Eventually the framework designed within the "sandbox" will give rise to a self-regulating organization coalescing entrepreneurs, market participants, and scientific experts, tasked with developing legal structures which the "first outline" does not address, including "ICO, mining, remote identification, and the formation of a list of crypto-currencies, the use of which is not recommended."

Titov concluded that he does have a cryptocurrency portfolio of his own, affirming, "I do not have a crypto currency."