Russian Legal Framework for Digital Financial Assets

Publication type Article
Status Published
Occupation: Head of Centre for Legal Research of Digital Technologies
Affiliation: The State Academic University for the Humanities
Address: Russian Federation, Moscow
Journal nameLaw & Digital Technologies
EditionVolume 1 № 1

The article is devoted to the new Russian law on digital financial assets. The adoption of this law was an important step towards the formation of a legal framework for cryptoassets in Russia. Four types of legal framework models for crypto-assets around the world are identified: adaptation, fragmentary, experimental, and innovative. The Russian model of the legal framework for digital financial assets is close to an innovative model. The article analyses legal definitions of new legal concepts, such as "digital rights", "digital financial assets" and "digital currency". They represent different types of cryptoassets and are considered  property under Russian civil law. A special legal status has been established forthe exchange operator of digital financial assets and for the operator of the information system in which digital financial assets are issued.The article describes the legal requirements for such participants in the cryptomarket, which are established to protect consumers from fraud and mismanagement. Particular attention is paid to the legal regulation of the issuance and circulation of cryptocurrencies, which the law names as digital currencies. Digital currency is not recognised as a legal means of payment in Russia.It can only be issued and circulated using the Russian information infrastructure.Based on the analysis of the new law, it is concluded that the Russian monetary authorities are not interested in establishing a complete and clear legal framework for participants in the cryptomarket.Their new initiatives aim to tighten regulation of the circulation of digital financial assets, especially digital currency.


Keywordsdigital rights, digital financial assets, digital currency, cryptoassets, cryptocurrency
AcknowledgmentThis research was supported by the Russian Foundation for Basic Research via grant No 18-29-16145 MK «The Mechanism of Legal Regulation of Relations Using the Distributed Ledger Technology».
Publication date02.07.2021
Number of characters27499
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1 Introduction
2 On January 1, 2021, the Federal Law dated 31.07.2020 No 259-FZ "On the Digital Financial Assets, Digital Currency and on Amendments to Certain Legislative Acts of the Russian Federation" (hereinafter - the Law on DFA) came into force in Russia. The Law on DFA is intended to provide legal certainty for Russian holders of cryptoassets. Russia, like many other countries in the world, has gone a long way towards legalising crypoassets. At first, the Russian monetary authorities attempted to ban cryptocurrencies and other cryptoassets. Later, the necessity of creating legal regulation of crypto assets for the development of the digital economy in Russia was recognised. The federal project "Legal Regulation of the Digital Environment" became the starting point for the formation of the legal framework for cryptoassets. To ensure the legal conditions for the implementation and use of innovative technologies in the financial market, it was planned to adopt a federal act which was aimed at “regulating the circulation of cryptocurrencies and conducting ICOs (Initial Coin Offering), determining the status of digital technologies used in the financial sector and their concepts”. However, a more general concept – “digital rights” – was the first to appear in legislation. For this, the corresponding amendments were made to the Civil Code of the Russian Federation. Digital financial assets are recognized as a type of digital rights in accordance with the Law on DFA. The concepts of "digital rights" and "digital financial assets" raise many questions for both legal scholars and practicing lawyers (Novoselova et al. 2019). The first section of this article analyses models of legal frameworks for cryptoassets in countries with crypto-friendly jurisdictions. Next, we discuss the legal essence of digital rights. The third section considers the legal definition of digital financial assets and their types. Section four describes the legal statuses of operators of information systems, in which DFAs are issued, and the legal statuses of DFA exchange operators. The fifth section deals with the legal regulation of the issue and circulation. Finally, we discuss digital currency (cryptocurrency).
3 1. Models of legal frameworks for cryptoassets
4 While many countries are in process of cryptoassets legitimization, there is still no country in the world with a comprehensive regulation of cryptoassets. There are several reasons for this. Firstly, cryptoassets, could not be comprehensively regulated by any national legislation, due to their extraterritorial character. Secondly, any legal regulation could slow down of an introduction of new technologies, such as blockchain, into economic activities. The legal regime of different countries of the world in relation to cryptoassets can be friendly, unfriendly or neutral. Countries with crypto-friendly jurisdictions establish various models of legal frameworks for crypto-assets which can be classified into several categories (Sannikova and Kharitoniova 2020): 1) An adaptation model, in which cryptoassets are regulated by existent legislation. For example, in the USA the Securities and Exchange Commission determines, based on the Howey test, whether tokens are securities like shares or bonds. If tokens are recognized as security tokens, then the legislation on securities applies to their issue. 2) A fragmentary model, in which cryptoassets are regulated by specific amendments made to existent legislation. For example, in Japan, cryptoassets’ legislation was formed by amending existing laws: Payment Services Act No 59 of 2009; Financial Instruments and Exchange Act No 25 of 1948. 3) An experimental model in which cryptoassets are regulated by the legislation related to special economic zones. The Republic of Belarus has created a legal regulation of crypto activity only for residents of Hi Tech Park. Belarus Hi Tech Park is a special economic zone. The Decree of the President of the Republic of Belarus No 8 dated 21.10.2017 “On the Development of the Digital Economy” legalized crypto assets, but their circulation is limited and controlled. 4) An innovative model, in which the cryptoassets regulation is based on special legal acts. Malta became the first country in the world to regulate blockchain and cryptoassets by special laws. The Malta Digital Innovation Authority Act of 2018 establishes the Malta digital innovation centre to certify distributed ledger technology platforms. The Innovative Technology Arrangement and Services Act of 2018 regulates the registration procedures for crypto exchanges and other crypto markets. The Virtual Financial Assets Act of 2018 defines the legal regime of DLT (Distributed Ledger Technology) assets, including ICO procedures. Virtual financial assets include cryptocurrencies and payment tokens and exclude virtual tokens, electronic money and financial instruments. In 2019, Liechtenstein passed the Token and Trusted Technology Service Provider Act, known as the "Blockchain Act". Under this act, a token is recognized as a tool for the digital representation of a right. This is based on the concept of the Token Container Model. A security token contains a real asset. It may be a share, a bond, gold, real estate, and so on. If the token is not secured, it is an “empty container” that exists as a digital code, such as a bitcoin. Utility tokens within this concept contain the right to use the software (Software Usage Right). The examples of Malta and Liechtenstein shows the trend of national legislatures developing special legislation. However, the efficiency of such legislation is still questionable. The Russian legislation model is closest to the innovative model. However, it is not as comprehensive as as the legislation in Malta and Lichtenstein.

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