Expert opinions, LAW

A cryptocurrency breakthrough in Belarus?

Denis Smirnov – executive at Raddar trading startup

On December 21, 2017 Belarusian President Alexander Lukashenko signed a presidential executive order On Digital Economy Development. The document became effective on March 28, 2018 and fully relieved cryptocurrencies sector of VAT and income tax until January 1, 2023. It was a formal recognition of such concepts as blockchain, mining, tokens, smart contracts, etc.

In fact, Belarus joined some most developed nations in a thrilling experiment of legalizing criptocurrencies business. The basic idea is, any transactions with tokens are relieved of whatever taxation and are not regarded as an entrepreneurial activity. Ordinary citizens (individuals) are allowed to own digital currencies, mine them, keep them in their accounts, buy or exchange for BYN. Tokens can also be given by will or presented as a gift.

The goal declared by Lukashenko is ensuring conditions for stimulating international IT companies to open their branches in Belarus, to establish research centers for advancing blockchain projects. That goal is to become a priority for the national digital economy.

The executive order has been effective for nearly half a year by now. So it would be interesting to see if Belarus has really become a cryptoparadise which attracts entrepreneurs and investors from all over the world.

Meanwhile, little has changed in the cryptoenvironment of Belarus over the past six months.

In April, a mining hotel was opened in Lida. In may, Belarus was among top ten most cryptocurrency-friendly jurisdictions (according to experts of BlockShow Europe blockchain conference). A bit later, Foreign Minister Andrei Dapkiunas made a statement in South Korea that his country was getting ready to welcome Asian investors in the national Hi-Tech Park.

In fact, nothing has happened. International companies have not opened any sizeable offices in the country, and even local startups involved with cryptocurrencies have ignored every opportunity offered by the Hi-Tech Park.

Experts believe, a fundamental cause for such a digital Belarusian failure is lack of a legible legislation. The executive order describes and regulates cryptoindustry in very general terms, while until now there are no elaborate procedures for entrepreneurs. As practical experiences of the very few businessmen who attempted to launch some blockchain projects witness, it is officials who have no understanding of the legislation and no willingness to explore it.

Lack of the government servants’ qualifications is a plague of any overbureaucratic system. Suffice it to say, the very executive order was drafted through involvement of a rather well-known and ill-fated IT entrepreneur Victor Prokopenya who had served a sentence for tax avoidance and running an unlawful business. Even such aspects can produce a negative impact on people’s interest to be involved with cryptocurrencies within the Hi-Tech Park.

Belarus’ national cryptocurrency, thaler, has had an unenviable fate. The hype about it peaked last autumn when the domestic testing of the token started in September 2017.

Over the past year, some infrastructure has been developed, thaler has got an exchange of its own, and its developers started trading it at some other exchanges. Besides, a miner community was organized, several miner pools launched, and special information resources established. But that was the end of the story and the process has not moved any further. Denis Lavnekevich, one of thaler’s founders, is nevertheless quite optimistic. He says, all major cryptocurrencies have come to a certain balance now, so strategically thaler’s position is rather strong.

To sum up the above, it can be said the initiative of the authorities of Belarus was good and beneficial for the national economy. Yet it has failed to be adequately implemented.

The said presidential executive order is some kind of a framework document which specifies what can be done about cryptocurrencies, but does not describe how that can be done.

To fully launch a functioning digital economy, Belarus needs an elaborate legislation. First, it was mentioned the legislation would be drafted by the government and the National Bank. Later, President Lukashenko charged the executives of the Hi-Tech Park with drafting the specifics of the laws. Still, the position of the policymakers is quite clear: there is no point to take any steps until a visit of FATF (Financial Action Task Force on Money Laundering) takes place. That is, legislative matters will not be reviewed before the next year.

One way or another, experts interested in development of the digital economy of Belarus hold a common opinion that in the middle- or even long-run any changes in the national cryptocurrency market are unlikely.

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