In many countries, the uptake of cryptocurrency and the Blockchain has been fast and extremely popular. Around the world, the increase in crypto adoption between 2012 and 2021 was considerable, sending the price of Bitcoin up by 540,000% in this time period. However, the same has not been true in communist countries, such as Russia […]
What is a CBDC? A CBDC is a form of digital currency issued and backed by a central bank. CBDCs are typically a country’s traditional money in digital form – for example, China’s digital renminbi. CBDCs are distinct from cryptocurrencies, which rely on the application of cryptography to manage supply and security. A CBDC is […]
Introduction to Bitcoin and crypto trading in Russia
Russia – now waging a war/military maneuvers/fact-finding mission with its neighboring country Ukraine – had already begun a clampdown on crypto purchases by its population prior to the war. Now, however, with international sanctions on the movement of money, Russia’s central bank has indicated that it is open to using cryptocurrency for international payments. Hard on the heels of this inevitable volte-face, is news that a new version of its law, On Digital Currency, is to be announced. Crypto mining may also be back on the menu.
Russia has performed several about-faces regarding cryptocurrency. Last quarter it attempted to stem the popular enthusiasm for Bitcoin by banning all forms of spending – at least within the country – whilst still allowing crypto investment. Following China’s outright ban, the country became a leading world miner of Bitcoin, although this has given the government much cause for concern over the amount of energy being used to achieve this. Recently, crypto came back on the menu with the former ban being partially lifted, so it remains to be seen what’s next. High scores for crypto ownership among the population and a high number of blockchain enterprises, enable Russia to rise up to 25th place but the invasion of Ukraine has changed everything.
Bitcoin and cryptocurrency trading in Russia
Accumulating your hard-earned, traded, or mined cryptocurrency could be the easy bit. The hard bit is spending it because Russia formally bans the use of cryptocurrency for buying traditional products and services – in the Russian economy, at least. That’s because it’s not deemed as legal tender for making payments. You can, of course, just sit on it and get richer and richer…or poorer and poorer depending on the price fluctuation.
Crypto trading & crypto law in Russia
Russia is served by leading exchanges and has a population with high volumes of trading and holding cryptocurrency but that is not to say Russia is totally sold on cryptocurrency and has imposed stringent restrictions on its use. Digital currency is not regarded as legal tender for payments, and the ruble remains the only official monetary currency, and residents aren’t allowed to receive digital currencies as payment for goods, work, or services. New laws stipulate cryptocurrency as a personal asset. Individual residents and registered legal and corporate entities, registered representations of foreign companies, and international institutions are required to declare their cryptocurrency possessions, rights, transactions, and balances. Failing to present timely reports will incur fines in proportion to the crypto holdings.
Paying tax on crypto trading in Russia
Individuals and legal entities empowered to use digital currencies are obligated to inform the tax authorities when the value of any activity exceeds 600,000 rubles in a calendar year. Failure to comply incurs fines of up to 40% of the unpaid taxes.
Tax relief, changing residency, and gifting crypto coins in Russia
The taxable gross capital/wealth you have accrued is considered to be all capital objects with a sale value that you own at the end of the income year – and that includes your cryptocurrency. Using cryptocurrency as a means of payment and the exchange of virtual currency services can be exempt from VAT but you need tax advice as to the exact circumstances. Overall, the taxation of your gains applies wherever in the world your assets are located and your crypto holdings will be taxable on the gross capital wealth basis whether you gift it or not. Should you change residency, your tax matters will be applicable to your new country of residence
Planning your retirement and investing in cryptocurrency in Russia
Owning cryptocurrency may be acceptable, but stock exchanges in Russia shouldn’t list investment products related to cryptocurrency prices according to the Russian Central Bank, which regulates the industry. In a ruling to prevent investors from getting access to products they may not understand, the Bank of Russia believes that stock exchange operators should avoid listing any securities that provide payments based on the prices of cryptocurrencies. Asset managers should also exclude such securities from mutual fund portfolios, and brokers should not offer such securities to non-qualified investors. So far, this ruling doesn’t include any central bank digital currencies that may be issued in the future. I think the answer, therefore, is that planning your retirement with crypto assets may not be the best way forward.
Russia’s Financial services’ outlook on Bitcoin and the crypto economy
Much of the lead taken by Russian banks regarding crypto comes directly from central bank guidelines. To date, banks can offer cryptocurrency exchanges – under the supervision of the central bank and new digital currencies can be issued. This lighter touch, following on from a potential ban on cryptocurrency some time back indicates Russian willingness to indulge in the great crypto experiment taking place around the world.
Russia and Defi
Central banks around the world are all investigating or trialing some form of digital currency and Russia is definitely one of them. The Bank of Russia has analyzed the potential of crypto in many respects, including the practicality of issuing a ruble-based central bank digital currency (CBDC). In essence, whilst Russia, in common with some other countries, views cryptocurrency as possibly disruptive to mainstream financial systems, the blockchain technology behind it is seen much more enthusiastically. However, any practical assessment of decentralized finance (Defi) as a replacement for the existing financial system remains at the level of speculative debate.
Crypto regulation in Russia
Russia has just implemented stringent new laws on the regulation of the cryptoeconomy, but no bans. The rise of cryptocurrency in Russia continues and the Bank of Russia, perhaps accepting that it cannot stem the rise and through which all transactions flow, takes a pragmatic approach. Surveillance of all digital activity is monitored and overseen, including the rise of Russia-hosted ICOs. In an attempt to prevent crypto being used for criminal purposes, Russia’s financial surveillance body, Rosfinmonitoring, has powers to trace suspicious transactions involving crypto. As part of the initiative, Russian public officials have been banned from owning crypto starting this year.
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