Artem Genkin discusses the DFA market development in Russia

Russia’s Chamber of Commerce and Industry held a joint meeting of the Commission on Digital Financial Assets and the Expert Council on Evaluation of the Regulatory Impact of Legislation on “Guidelines for Drafting Legal Regulation of Digital Financial Assets (DFAs) and Utility Digital Rights (UDRs)”. Artem Genkin, Doctor of Economics, Professor, President of the NPO Center for Protection of Bank Clients and Investors, shared his views on the challenges facing the tokenized financial assets market.

Artem Genkin, Doctor of Economics, Professor, President of the NPO Center for Protection of Bank Clients and Investors. Yevgeny Biyatov / RIA Novosti

According to the expert, our current imperative is to determine the optimal level of state control over DFA infrastructure operators, which would promote this market’s development.

Different countries regulate tokenized securities in different ways. At present, Russian laws offer a narrower scope of opportunities than most countries that use Romano-Germanic law, Artem Genkin emphasized.

“On the other hand, the relevant legal framework in Russia includes the notion of a registered information system operator, which is an advanced concept. Having such entities is advisable and useful for tracking investor interests and protecting their rights,” the expert added.

Other market players believe that current Russian laws ensure a high level of control over information systems (platforms on which DFAs are issued) already, and that this over-regulation actually hinders the market’s development.

“I can’t agree with this point of view. In my view, it is imperative that this high-tech, highly profitable (and predictably high-risk) segment develops progressively and without rush, without scandals, without massive fraud cases or deceived investors. That is, a positive public landscape for these innovations should be preserved at all times,” the expert emphasized.

This kind of stability is sometimes worth sacrificing faster growth for, he believes.

Furthermore, the regulatory framework must establish synergistic interaction between the DFA market and the traditional financial market and its individual institutions. In particular, it should provide tools for mutual conversion of conventional securities and tokenized assets, as well as for trading DFAs on conventional financial market platforms.

In addition, it is essential to develop an effective policy of information sharing among stakeholders. This applies to information about the DFA issuance process proper as well as the rules of public notification of such issuance. The ultimate goal is to maximize this market’s transparency, Artem Genkin explained.

He also listed a number of other steps to improve the DFA market operation:

  • establishing convenient gateways to attract investors from friendly countries;
  • developing a set of incentives to attract domestic retail investors;
  • encouraging issuers from various sectors of the economy, primarily from the real sector, to enter the DFA market;
  • accumulating and generalizing law enforcement practices;
  • formation of a guild of conscientious and qualified investment consultants focused on the DFA market.
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