Russian Draft Bill on Crypto and Blockchain Will Allow Privately Held Firms To Digitise Shares

By Rishma Banerjee

On 21st October, Russian local media body Vedomosti reported that the long-awaited draft bill on cryptocurrency and blockchain regulation would henceforth allow private businesses and legal entities to use blockchain to digitise their shares.  The Russian State Duma, in the new edition of the draft bill titled “On Digital Financial Assets”  has allowed privately held companies to conduct transactions of Digital Financial Assets (DFA), which function as digitised equity for the company. However, this DFA data, to be stored via blockchains, will be verified and checked by the Russian Central Bank.

RBC, another Russian news outlet which primarily focuses on business, has clarified that DFA is equivalent to a crypto token, the definition of which is sure to be included in Russian Civil Law, in order to facilitate the citizens to appeal to courts if the rules of token issuance are violated.

The new edition of the draft bill, which awaits the second of the three customary Duma readings, if approved will be applicable to all limited liability companies and non-public joint stock companies. But, one, these assets are issued, the company won’t be able to go public, at least not by traditional means.

This Bill was first introduced by the Russian Ministry of Finance in January, and it was expected that the bill would be passed by July 2018. However, in March Aksakov and his other deputies came up with a slightly different version, which included the establishment of KYC regulations for customer identity verifications. This draft was accepted by the State Duma, in the first of the three readings. As the bill waits for a second hearing in December, it is going through changes, as just this past Friday, 19th October 2018, the definitions of words like “cryptocurrency“, “mining“, etc were removed from the document, leaving it what Elina Sidorenko, the vice president of the Russian Union of Industrialists and Entrepreneurs (RSPP), called “unfinished and fragmented.”