Financial Crime World

Russian Federation Takes Steps to Regulate Cryptocurrency Trading and Compliance

The Russian government has introduced a bill aimed at regulating cryptocurrency trading and compliance in the country. Bill No. 1065710-7, proposed by the Ministry of Finance on December 1, aims to define responsibility for violating rules established by the bill and establish tax liability for unlawful failure to declare information or declare false information about transactions with cryptocurrency.

Key Provisions

  • Citizens, individuals, and legal entities operating in Russia will be required to declare their cryptocurrency holdings.
  • Failure to comply with these requirements will result in tax penalties.
  • Cryptocurrency is recognized as an “asset” and its taxation is set out accordingly.

Background

The Russian government has been engaged in discussions about how to legally define cryptocurrencies and incorporate them into the legal system since July 31, when President Vladimir Putin signed Federal Law No. 259-FZ on Digital Financial Assets and Digital Currencies.

Digital Financial Assets and Digital Currencies

  • The law regulates relations concerning the issuance, recording, and circulation of digital financial assets (DFAs).
  • Digital currency is defined as a digital code used as a means of payment and savings tool.
  • However, residents are not allowed to receive digital currencies as payment for goods, work, or services.

Cryptocurrency Exchange Operations Prohibited

Despite the new law, cryptocurrency exchange operations remain prohibited on Russian territory. Judicial protection is only possible if digital currency possessions or transactions are declared in accordance with the law.

Taxation of Cryptocurrency

The proposed bill aims to implement Federal Law No. 259-FZ and requires taxpayers to declare their digital currency possession rights, transactions, and balances if the total value exceeds 600,000 rubles (approximately US$7,800) in a calendar year.

Consequences of Non-Compliance

  • Failure to present timely reports or provide inaccurate information constitutes a tax offense punishable by fines ranging from 10% of the total value of the cryptocurrency received or transferred to 40% of unpaid taxes.