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The Russian government is in the process of finalizing the federal law for the regulation of cryptocurrencies and initial coin offerings. The draft law has now been officially published. It regulates the creation, issuance, storage, and circulation of cryptocurrencies.
Legal Crypto Definitions
The Russian government has officially published the draft federal law entitled “On Digital Financial Assets” which regulates cryptocurrencies in Russia.
This draft law was introduced by the country’s finance ministry at the end of December. It was followed by much discussion and amendments to the bill before it was finally released to the public on Wednesday. Article 5 of the document states that “This federal law shall enter into force 90 days after the date of its official publication.” According to the document:
This federal law regulates the relations arising in the creation, issuance, storage and circulation of digital financial assets, as well as the exercise of rights and performance of obligations under smart contracts.
The draft law provides Russia’s official cryptocurrency-related definitions for the first time including the definition of cryptocurrency, tokens, smart contracts, crypto exchanges, and mining.
Cryptocurrency is defined as “a type of digital financial asset created and accounted for in the distributed registry of digital transactions by participants in this registry in accordance with the rules of maintaining the registry of digital transactions.” Meanwhile, a token is defined as “a type of a digital financial asset that is issued by a legal entity or an individual entrepreneur (hereinafter referred to as an issuer) in order to attract financing and is recorded in the registry of digital records.”
As for mining, it is deemed “an entrepreneurial activity aimed at creating a cryptocurrency and / or validation in order to receive compensation in the form of a cryptocurrency.” Mining activities are subsequently described as “legally valid” actions.
Rights to Exchange to Other Assets
The document clarifies that Russians have the right to trade their cryptocurrencies for other digital assets and for fiat currency, stating:
Holders of digital financial assets have the right to make transactions for the exchange of digital financial assets of one type for digital financial assets of another type and / or the exchange of digital financial assets for rubles, foreign currency and / or other property only through the exchange operator of digital financial assets.
“Citizens of Russia will be able to buy and sell cryptocurrencies and tokens only through professional participants of the securities market,” Forbes Russia emphasized.
Exchanges and Wallets
After providing the definition of cryptocurrency exchanges, the document proceeds to explain, as also previously reported by news.Bitcoin.com.
Operators of the exchange of digital financial assets can only be legal entities.
The exchanges must be “established in accordance with the legislation of the Russian Federation and carry out the types of activities specified in Articles 3 to 5 of Federal Law No. 39-FZ of April 22, 1996 ‘On the Securities Market’.” Alternatively, they can also be “legal entities that are the organizers of trade in accordance with the Federal Law of November 21, 2011 No. 325-FZ ‘On Organized Trading’.”
The document also puts restrictions on wallets. A wallet is defined as “a software and hardware tool that allows you to store information about digital records and provide access.” However, the draft law states that a wallet must be “opened by the operator of exchange of digital financial assets only after passing the procedures of identification of its owner in accordance with the Federal Law of August 7, 2001.”
Token Sales and Their Investors
A large part of the document addresses initial coin offerings (ICOs). It specifies rules for token sales such as the issuing procedures and what documents and information need to be disclosed prior to the sales. For each ICO, the issuer must also provide an investment memorandum containing all information related to the issuer and the tokens. The rules state:
An offer for the release of tokens, an investment memorandum, rules for keeping the register of digital transactions, as well as other documents…must be published no later than 3 working days before specified in the offer for the release of tokens.
Furthermore, tokens “may not be offered to potential purchasers in any form or by any means using advertising” prior to the publication of an offer for the release of tokens. In addition, the draft law imposes restrictions on non-qualified investors, stating:
Persons who are not qualified investors in accordance with the Federal Law No. 39-FZ of April 22, 1996 ‘On the Securities Market’ can purchase tokens in the amount of not more than fifty thousand rubles within a single issue.
What do you think of this draft law for the regulation of cryptocurrencies in Russia? Let us know in the comments section below.
Images courtesy of Shutterstock and the Russian government.
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Aleksander Berentsen and Fabian Schär of the Federal Reserve Bank of St. Louis have recently published an article that emphasizes many of the benefits of cryptocurrencies. The article states “that cryptoassets are well suited to become an important asset class,” in addition to offering praise regarding a number of the major applications associated with cryptocurrencies.
Reserve Bank Representatives Praise Bitcoin
The piece opens by outlining many of the core motivations underpinning the development of bitcoin, stating that it was Satoshi Nakamoto’s intention to “develop a cash-like payment system that permitted electronic transactions but that also included many of the advantageous characteristics of physical cash.” The authors state that bitcoin was designed to comprise a monetary form that would allow the electronic transfer of value through the circulation of data files – allowing bitcoin to “retain the advantages of physical cash,” whilst being able to be distributed freely via “electronic networks.”
Berentsen and Schär state that “the true potential of blockchain technology will become apparent” only once distributed ledger technology attains general adoption, which the authors anticipate may take “many years, or possibly decades.” As such, the authors conclude that one cannot predict the industries in which bitcoin and blockchain technology will have the greatest impact – however, the article emphasizes the shift in economic dialectical relations may be borne through the innovations of colored coins and smart contracts.
Of colored coins, the authors state that bitcoin “can be used to produce fingerprints for all kinds of data files and then store them in a blockchain.” The article states that “public blockchains [create] the potential to monitor data files,” which may have far-reaching implications with regards to “data integrity.” It is asserted that the employment of colored coins renders “any manipulation attempt […] apparent because any change to the data file will lead to a completely different hash value,” thus creating a decentralized, untamperable record of said data that is publically available to all.
Smart contracts are described as “self-executing contracts.” The authors state that the typical function of smart-contracts is “to stipulate that a Bitcoin payment will be executed only when a certain condition is met.” In addition to such, the authors state that smart-contracts can be used to host a variety of applications, including “e-voting systems, identity management and decentralized organization, and various forms of fundraising.”
Risks Associated With Cryptocurrencies
Despite the authors’ optimism regarding cryptocurrencies, a number of risks are identified to be associated with crypto assets. Firstly, the article emphasizes that risks that forks may pose to specific cryptocurrencies, describing the emergence of Ethereum Classic and Bitcoin Cash as having occurred as a result of ideological dissent between conflicting factions within a given cryptocurrency community.
The perceived energy wastage that stems from proof-of-work mining and increasing mining difficulty is also cited as a significant risk pertaining to the cryptocurrency space. However, the authors contest the mainstream narrative surrounding such by emphasizing the energy costs associated with centralized payment systems, using the lack of research conducted into the electricity consumption required to operate a central bank as an example of such. Beyond bitcoin, the article also asserts that “many crypto assets use alternative consensus protocols, which do not (solely) rely on computational resources.”
The article also identifies the price volatility associated with cryptocurrencies as a risk which may pose a hurdle to the widespread adoption of virtual currencies. The authors state that “it is very likely that the Bitcoin unit will display much higher short-term price fluctuations than many government-run fiat currency units,” owing to the absence of a mechanism such as “the Federal Reserve System has been explicitly founded ‘to provide an elastic currency’ to mitigate the price fluctuations that arise from changes in the aggregate demand” for monetary instruments.
Whilst Berentsen and Schär state that “Price volatility and scaling issues frequently raise concerns about the suitability of Bitcoin as a payment instrument,” bitcoin is described as a “novel technology” that allows the “stor[age] and transfer [of] monetary unit[s] without the need for a central authority.”
Moving past the authors’ assessments of bitcoin as a means of payment, the article states that “As an asset, however, Bitcoin and alternative blockchain-based tokens should not be neglected,” emphasizing many unique applications made possible by cryptocurrency – such as the management and verification of the integrity of data, and the emergence of smart contracts. Said utilities, the authors write, comprise “Promising applications […] which may bring change to the world of finance and to many other sectors.”
What is your reaction to Berentsen and Schär’s apparent praise for bitcoin and cryptocurrency? Share your thoughts in the comments section below!
Images courtesy of Shutterstock, Wikipedia
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The post St. Louis Federal Reserve Reps in Favor of Cryptocurrencies appeared first on Bitcoin News.