RUSSIA AND DIGITAL CURRENCIES

Russia, which is traditionally hostile towards the crypto sector, seemed to have turned this way of thinking around following the invasion in Ukraine.

The contrasting situation has seen a cold war between the Central Bank and Parliament over the past year, with news first of openness, with important steps forward, and then immediate returns to the past, with obvious closures leading one institution to win and the other to succumb.

Parliament has passed a bill that would exempt those operating cryptocurrencies in Russia from paying VAT.

It appears that the law includes a tax rate on income from crypto capital gains, with taxation at 20% for those issuing cryptocurrencies, which can drop to 13% for Russian companies and 15% for foreign companies operating crypto in Russia.

This taxation is among the lowest in the world and will hopefully attract capital from abroad.

The Bank of Russia, which has always been sceptical of cryptocurrencies, has therefore moved closer to welcoming other digital assets and granted the blockchain platform Atomyze Russia its first licence to exchange cryptocurrencies.

But a few days ago there was the immediate about-face with Russian President Vladimir Putin signing a law banning cryptocurrencies as a payment option in the country and reaffirming the Ruble as the only official payment method in the country.

Before now, the country did not have a law banning digital assets for payments.

All this while some weeks ago, Russia’s leading bank ‘Sberbank’ announced that it had initiated the first transaction of digital financial assets on its platform, with its subsidiary SberFactoring executing a 1 billion rouble (around USD 16 million) issue with a maturity of three months.

Sberbank, which received its licence in March, said in a statement that digital assets are issued on its platform using blockchain technology and smart contracts.
Sberbank’s platform will soon be available to all of the bank’s corporate customers.

Through this move, Russia’s leading bank has sought to carve out a new role for itself, as it was forced to withdraw from European markets due to sanctions imposed by the US and its allies over the invasion of Ukraine.

However, the example is set to be followed by groups such as VTB, Russia’s second largest bank, which just over three weeks ago conducted a similar experiment.

Thus, the precarious situation with strong contrasts remains, and let us remember that the potential of cryptocurrencies and digital assets was initially taken into consideration, so much so that in January, Putin expressed his support for Bitcoin mining, saying that the country has advantages such as surplus electricity and well-trained staff.

The Russian situation regarding digital currencies is in flux and perhaps reverberations from the attacks on Ukraine lead to decisions being made and then immediately disregarded.