In the wake of news that Huobi Global, one of the largest crypto exchange firms in the world is launching its trading app in Russia, the country has introduced more stringent crypto regulation policy.
Local reports revealed on Thursday that the country’s finance ministry has prepared a package of amendments to Russia’s law on digital assets. Contents of these amendments are severe punishments on failure to report cryptocurrency transactions for tax purposes.
It would be recalled that Russia’s President, Vladimir Putin in July signed two bills on digital assets into law. These laws which are to become effective 2021 enable firms issue digital securities on a blockchain if they are properly registered with the Bank of Russia.
The law also recognizes cryptocurrencies as properties. Hence, they can be taxed and cannot be used to pay for goods and services.
Now, Russia’s finance ministry has introduced more harsh restrictions for crypto transactions in the country.
Prison sentence, severe fine on wanting crypto holders
The new amendments primarily introduce penalties for failure of reporting annual crypto transactions for tax reasons.
Crypto holders are required to report their digital wallet address, transaction history, and balance if they receive more than 100,000 Russian rubles (around $1,300) annually. Failure to do this, crypto holders risk paying fines worth 30 percent of unreported transactions.
Beyond fines, when transactions exceed one million rubles ($12,964), and it is not reported to tax authorities, it becomes a criminal offense. These attract up to three years prison sentence with hard labor (option).
Over the counter (OTC) crypto dealers are also obliged by law to give a detailed report of all transactions involving rubles and Russian IP addresses to the tax authorities.
Crypto firms react to Russia crypto regulation
Many crypto firms revealed that the law had little or no impact on the crypto space in the country. This said this in July after the government legalized crypto and ban it as a means of payment.
Anton Kozlov, head of the Russian market at Paxful, said that the DFA law has caused a lot of confusion. He explained that the impact of the law is not understood by industry players.
Similarly, Alexander Ivanov, director of Waves Platform said the law has no impact on the industry. He attributed this to the lack of regulatory clarity. However, he said this is a setback to the development of the fast-growing industry of decentralized finance or DeFi.
Despite these harsh restrictions by Russia’s ministry of finance, they have faced strong criticism from other ministries. Ministry of Economy, Justice, and Ministry of Data Science for plans to restrict or ban cryptocurrency totally in Russia.