- Protecting assets is hardly the main objective
- The Prosecutor General’s Office is pro-regulation
- Additional legislative amendments
- What does it mean in practical terms?
Russian authorities will soon decide whether crypto should be recognized as property. A proposal to do that has been put forth by Viktor Bondarev, Chair of the Federation Council Committee on Defense and Security. Who is going to benefit from this decision and why?
Protecting assets is hardly the main objective
Any law-abiding citizen would rightfully expect their government to care about protecting such citizen’s property. However, this is not the case here.
What Viktor Bondarev is looking for isn’t the safety of the citizens’ crypto assets. Instead, he believes that if the term “digital currency” is introduced into the Criminal Code and the Criminal Procedure Code, there will be a legitimate right to arrest crypto during investigation procedures.
As early as 2021, the Prosecutor General’s Office of the Russian Federation Igor Krasnov emphasized that new crypto-related instruments were widely used to commit fraud and crime. He suggested that the problem was exacerbated by the gaps in the legal regulation.
“The status of online platforms that provide an opportunity to buy and sell cryptocurrency anonymously has not been determined yet, and the issue of classifying virtual assets as property for the purposes of criminal proceedings has not been resolved. We have already drafted a bill that will regulate the matter, and we hope that lawmakers will support it,” Krasnov said back then.
Nowadays, crypto only qualifies as property under laws on bankruptcy and on enforcement proceedings, within the anti-money laundering legislation, and the anti-corruption law
The Prosecutor General’s Office is pro-regulation
The term “digital currency” is used in Federal Law No. 259-FZ “On Digital Finance Assets, Digital Currency and on Introduction of Changes to Separate Legal Acts of the Russian Federation”. There, it is defined as a complex of electronic data which is recorded in an information system and can be recognized as a means of payment, or an investment.
However, crypto cannot be the subject of litigation — an issue which has drawn the attention of the Prosecutor General’s Office. Prosecutor Madina Dolgieva from the Office’s Main Judicial Department has advocated for the option of seizing digital assets during criminal investigation. In order to allow for this, they should be recognized as property.
Additional legislative amendments
Apart from crypto being recognized as property, there will be other amendments to Russian legislation. The Federation Council has approved an amendment to Federal Law “On General Principles of the Organization of Public Authority Within the Constituent Entities of the Russian Federation”. The new rules concern the procedure according to which Russian lawmakers are supposed to disclose details of their income, expenses and property.
For the lawmakers, crypto will already be considered a means of payment, and they are supposed to disclose any transactions (including potential ones) related to buying digital financial assets (“DFAs”) and digital currencies.
What does it mean in practical terms?
Crypto is often recognized as property in courts, but many fraud victims are unable to receive their digital assets or recover damages. Such problems also appear in criminal cases. Stealing crypto is recognized as fraud, but courts rule that digital money cannot be the subject of thief.
Often, courts are unable to determine the status of crypto, because while not being considered property, it is used as a means of payment. After crypto transactions were banned on the legislative level, things have become less ambiguous. However, victims of fraud are still unable to recover their assets. Judging by the Prosecutor Office’s opinions, this issue will not be solved anytime soon. It seems that the ability to block an account is more important for the authorities than helping people get back their stolen assets.
