Last week, Presidential Commissioner for Entrepreneurs’ Rights Boris Titov initiated a number of nitiatives regarding regulation of digital currencies, ICOs and cryptomining. This way, Boris Titov joined the formal discussion on cryptolaws prospects, since by July 1, 2018 Russia should get legislation on digital currencies and blockchain, since Russia’s president last October Instructed the Central Bank and the government accordingly. Market players are critical, in the first instance, about the Commissioner’s suggestion to allow digital mining to some “well known” entities only, as they see it as an attempt to monopolize the cryptomining market.
Are cryptocurrencies payment means?
Business ombudsman Boris Titov has been promoting digital currencies legalization in Russia for several years already. He was the first to come up with a respective draft law seeing a digital currency as means of payments, exchange, investments and savings. It is proposed to allow converting cryptocurrencies into rubles (identical to conversion of any foreign currencies), using them for ICOs, trading at exchanges and perform their mining. But all such activities are only permitted within regulative playpits. One of such playpits is in the process of being established in Vladivostok by the Russian Trading System (RTS). Within that playpit, use of digital currencies is not permitted as a means of exchange for commodities. Digital currencies may not be used at stores, just like dollars or other foreign currencies may not be used either. Therefore, it is intended to subject digital currencies to the regulation identical to that of foreign currencies. Exchange of cryptocurrencies for rubles is allowed to banks, payment systems and certified exchanges. When such conversion is effected, a simplified counterparties’ identification is permitted when no passports of the deals are required but the tax authorities are to be informed of the deals.
The issue of allowing conversion of certain digital currencies into rubles may at the first stage be authorized by the Central Bank only. At a later stage, decisions on such transactions may be made by exchanges, the way it is practiced in Japan. It is envisaged exchange of some 20 digital currencies may be permitted. The draft law ombudsman Titov has come up with, says nothing of the taxes on transactions with cryptocurrencies.
Boris Titov notes, that digital currencies are recognized as means of payment in the European Union and Japan. So if Titov’s suggestions are accepted, Russia will not be a pioneer in the sphere.
Still, the approach of ombudsman Titov differs from that of the Central Bank and the Finance Ministry which intend to qualify a cryptocurrency as “other properties”. It is true though, Russian finance minister Anton Siluanov compared Bitkoins to some quasi-money while the Central Bank governor Elvira Nabiullina said they are a financial pyramid.
Who may be a digital currencies miner?
As Boris Titov suggests, digital currencies should be issued by “well known entities” with “a minimum capital which can ensure security to market players”. The amount of such capital is not specified.
Peter Darakhvelidze, WebMoney Transfer portal development director, is certain “the idea will hardly get through the legislators since it does not match the antimonopoly legislation”.
“One may mine at any device. It is not possible to ban mining. Still, the initiatives of Boris Titov lead to a mining monopoly which may result in a mining prohibition. In such a case, any individual who has a graphics card, i.e. is a miner, but may not be qualified as a “well known entity” with “a minimum capital which can ensure security to market players” may be put in jail”, Timofey Ra, a mining expert, says.
A computer may be connected to a cloud mining, and in this case, mining takes place outside Russia. It is not possible to check mining fineness since there are miners who mine various digital currencies. Timofey Ra believes that if mining is permitted, it would be reasonable to issue patents to miners, the price of such patents being linked to the cost of electricity kilowatt.
“It is possible to monitor the energy used for mining”, Timofey Ra notes. “It is not possible to monitor everything else as it is inside a black box. It is in fact impossible to see where a mined digital currency goes, as there are very few specialists capable to do that”.
“Out poor miners should be left alone. Regulation should be about taxation, not about the miners activities. All the miners do, is solving mathematical problems at their computers, and getting some remuneration for that”, Alexander Nektorov of Nektorov, Saveliev & Partners law firm believes. “If I take my smartphone, open a calculator application, put together 2 and 2 and request some payment for finding the answer to the problem, my such entrepreneurial activity shall not be regulated in any manner. All I should do in this case, is just pay tax on my income”.
Who is the beneficiary?
In Russia, there are no major mining pools yet, such as China’s Bitmain Antpool and BTC.com (35.7% of the aggregate computation power of the Bitcoin global network) or btc.top pool (10.2%). In Russia, the best known pool is bitcoinrussia.ru (0.2%) set by RMC (Russian Mining Company) owned by internet ombudsman Dmitry Marinichev and businessmen Sergei Bobylev and Boris Zyryanov. This pool aims to gain 10% of the global Bitcoin mining capacities. To ensure that, Sunrise mining equipment production was launched by the company. It is noteworthy, Dmitry Marinichev is a member of the Federal Council at the Party of Growth headed by Boris Titov. Titov’s idea to only allow some “well known entities” to mine digital currencies, looks therefore very much like lobbying RMC interests. Dmitry Marinichev and the Party of Growth spokesman declined to comment on the situation.
The internet ombudsman is certain taxes should be collected in cryptocurrencies, too, since that would make the overall process manifold easier.
“The taxes will not go to the budget, but straight to those whom we designate as recipients of social allotments” Boris Titov believes. “Once digital currencies are legalized, a bank will become a totally different entity. It will not be a holder of our assets, it will not be a lender. It will be a servicing entity, finding out if money may be safely paid to such and such individual. After cryptocurrencies are legalized, nothing will change for an ordinary individual, but a lot for the state”.
By Natalia Kuznetsova