Cryptocurrencies cannot work with banks in Russia for now – lawyer Maria Agranovskaya
The Russian Federation needs to draft laws on digital assets. The crypto business still does not have a possibility to protect rights in court, as companies have to run activities in other jurisdictions. That is the opinion of the Head of Fintech, Blockchain, and Cryptocurrency practice, partner, advocate of Moscow College of lawyers GRAD Maria Agranovskaya. We talked to the expert about the security of the crypto business in Russia, necessity of the legal support for crypto companies, and their mistakes during ICO launch.
Interviewer: Blockchain Conference Moscow (BCM).
Respondent: Maria Agranovskaya (М.А.).
BCM:How can you assess the attempts to regulate blockchain and cryptocurrencies in Russia in recent years? What is the point of proposed draft laws and how reasonable are they?
M.A.: Regulation should not be revolutionary. Changes in legislation and adoption of new laws is a long process that requires harmonious performance of all existent acts (for now it works out poorly in our case) including previously adopted acts, as well as their practical application by revenue services, law-enforcement authorities, courts. For this reason, it is important not only to facilitate the drafting of texts that can meet modern standards, reflect emerging interrelations, and introduce new terminology but also to foresee in advance how they should be used in practice.
The possibility of open operational cooperation with the regulator is very important, the thing which we lack unfortunately.
The reasonability of updating the regulations does not provoke any doubts.
BCM: How secure are cryptocurrency operations (mining, trading, ICO launch) in Russia from the legal standpoint?
M.A.: Security is a relative concept. Currently, there is no possibility to protect your rights in court, demand assets from lawbreakers in case of a theft, or enter the results of mining in the books. The practice has a sporadic nature and does not reflect the picture.
Collaboration with banks is impossible – just with the help of different fabled situations, which is misleading.
Besides, the application of the law on illegal business activities or unlicensed operation (in the financial field) is possible, as well as other complications. Special attention should be paid to problems in taxation.
In short, risks are high – many people opt to work through foreign companies or remain in the shadow, which is risky and expensive.
BCM: Is turning to a lawyer obligatory for people that trade cryptocurrencies and launch ICO projects? Why?
M.A.: I think that any normal business should comply with the law. The protection of interests of business owners, building normal relations with partners is like hygiene.
It relates to any business. As for cryptocurrency mining or trading, conduct of ICOs on blockchain, you certainty need to find out which rules (in the light of legal uncertainty, which is not a vacuum) can be applied to specific legal relations irrespective of the awareness of involved individuals or their wants. Rather serious penalties can be applied for different violations.
BCM: What are the most common legal errors of startup founders that launch an ICO?
M.A.: Firstly, you should not think that “it will work anyways” or “it will settle down one way or another” – as I have already mentioned, the law is applied irrespective of our wants.
Currently, there are more and more examples of investigations conducted by regulators – not only the US Securities and Exchange Commission, but also the authorities of Singapore and Switzerland, Germany, for example in case of ICO conduct without due attention to local rules.
It is also true for ICOs oriented towards local people but conducted not only on the territory of the country.
Very serious penalties can be applied if a terrorist or a citizen of such countries as Iraq appears among investors using blockchain, here the principle of culpability is applied and not only on the territory of one state.
There are precedents of class action lawsuits against dishonest ICOs. Consequences may include huge financial penalties, refund to investors, but in case of a fraud, criminal sanctions may be applied.
BCM: How cryptocurrencies influence the economy? Will the influence be growing?
M.A.: If they remain in the shadow, the influence will not be strong. But the introduction of rules that allow attracting investments to technological projects can be lucrative for foreign and local investors. That becomes a nice helping hand (like in Gibraltar).
BCM: In your opinion, in which countries is the regulation of the crypto industry the most efficient?
M.A.: Singapore, Switzerland – thanks to the correct, harmonious combination of the regulators’ control and interaction with projects founders and investors.
BCM: Is there a necessity to draft international rules and standards for cryptocurrency regulation? Or does every country need its own rules?
M.A.: Absolutely, although it is a long process. Blockchain is a cross-border technology. ICOs that were conducted in the last 2-3 years, cryptocurrency trading and exchange are not tied to one country or one law. Therefore, control over the protection of honest projects and investors, introduction of licensing regulations, rules of collaboration with banks and other issues should be coordinated at the international level. But we can see that there are many other questions that require joint efforts – it is not that simple to come to uniform regulation and understanding for different countries. The EU is a good example, but even here, there is a split, and consequences of Brexit are not clear yet.