- The Complaint of Dmitry Timchenko and the Court Casestrong
- Why Does Mandatory Notification Violate Owners’ Rights?
- What Are the Possible Outcomes?
Digital asset holders have appealed to the Constitutional Court of Russia (CC) asking whether judicial protection applies to cryptocurrency transactions when the owner has not notified the tax authorities of their holdings. The court announced the case on its official website on September 19. The complaint challenges Article 14 of the Federal Law on Digital Financial Assets (DFA), which grants legal protection only if the Federal Tax Service (FTS) has been notified in advance.
Experts point out the ambiguous status of cryptocurrency in Russia: while it is recognized as property under the Criminal Code—meaning it can be seized or confiscated—in civil proceedings, owners face serious difficulties asserting their rights.
The Complaint of Dmitry Timchenko and the Court Case
The case concerns a complaint filed by citizen Dmitry Timchenko, who in 2023 sought to recover 1,000 Tether (USDT) tokens through court proceedings. He had transferred the tokens to another individual under a temporary-use agreement for digital currency. Despite the agreement, the debtor refused to return the tokens, and the Savelovsky District Court of Moscow dismissed the claim, citing the absence of prior notification to the tax authorities about the transaction. Higher courts upheld the ruling, but the claimant argues that this practice violates several provisions of the Russian Constitution.
Why Does Mandatory Notification Violate Owners’ Rights?
Timchenko argues that the requirement to notify the FTS places cryptocurrency holders in a discriminatory position, effectively depriving them of the right to legal protection of their property. Attorney Marat Amanliev noted that such a rule contradicts constitutional principles, as no similar requirement exists for other types of property. For example, ownership of a car is recognized regardless of whether it is registered with government authorities.
Other legal experts share this view. Dmitry Kirillov, a partner at the law firm Lidings, reported encountering multiple similar cases where claims were rejected solely because owners failed to notify tax authorities. According to Kirillov, this approach is unjustified, especially given that cryptocurrency is legally recognized as property under Russian law.
What Are the Possible Outcomes?
According to Andrey Gusev, senior partner at the law firm Nordic Star, the current situation reflects the unclear legal status of digital financial assets in Russia. Although the law allows cryptocurrency transactions and requires income from sales to be taxed, judicial protection remains limited by the notification requirement. Even with the introduction of a system to track crypto-related income, it currently applies only to mining revenues, not to other types of transactions.
Despite these challenges, a complete repeal of the notification requirement appears unlikely, given the general trend toward tighter regulation of cryptocurrency turnover. Most likely, the Constitutional Court’s decision will lead to targeted amendments aimed at improving the notification mechanism for digital asset owners rather than removing it altogether.
