A new set of regulations for ICOs has been presented by the Russian Ministry of Telecom and Mass Communications. The document has been published by the official portal regulation.gov.ru. The draft aims to regulate token sales and protect investors’ rights. It also defines digital tokens as “records in a distributed information system, created through cryptographic algorithms”.
Companies conducting ICOs will be required to guarantee they are able to buy back their tokens at a nominal price, Kommersant reports. The decree states that startups should possess authorized capital of at least ₽100 million rubles (>$1.7 million). Firms will have to set up a Russian bank account and sell their tokens only for rubles. Businesses taking advantage of crowdfunding through coin offerings must be registered in the Russian Federation and licensed to issue cryptocurrency. They can also apply for a special accreditation from the Telecom Ministry on a voluntary basis. It will be granted for a period of five years.
According to the draft, companies can use the funds they’ve raised to finance only projects that guarantee their ability to buy back the tokens. In other words, the money they have received should be invested as promised during the sale. The compliance with these obligations will be monitored by companies contracted by the ministry.
The decree has been criticized by representatives of the crypto sector for not covering some important aspects related to ICOs. The document does not say anything about pre-sales that give investors an opportunity to buy tokens at discounted rates. The so-called “lock up” option, prohibiting the resale of coins for a certain period, is not mentioned either.
Eastern Europe takes 22% of funds raised in ICOs
Members of the Russian crypto community claim the rules go too far and are not synchronized with the legislation introduced in the Duma. “Mincomsvyaz should not be managing these financial platforms,” said Arseniy Shteltsin, executive director of the Russian Association of Cryptocurrencies and Blockchain.
Lawmakers are finalizing the legislation that should regulate crypto-related matters in the Russian Federation. Two bills have been filed in the State Duma in the last couple of weeks. The draft law “On Digital Financial Assets” legalizes blockchain technologies, mining operations and initial coin offerings. Another bill amends Russia’s Civil Code to introduce terms like “digital money” and protect the rights of crypto investors. The bills should be adopted by early summer but changes to the tax laws are expected to follow later.
Critics also fear that the decree prepared by the Telecom Ministry will force Russian companies to organize their coin offerings elsewhere, in more favorable jurisdictions. “We haven’t seen a single ICO in Russia. All token sales are conducted abroad”, Artem Inyutin, managing partner at TMT Investments, told Kommersant.
A study conducted by East-West Digital News and ICO Bench reveals that businesses from Eastern Europe account for 17% of all initial coin offerings and pre-sales in 2017, Bitnovosti reports. The authors have identified 237 companies from the region that have attracted 22% of the funds raised through ICOs – at least $1.2 billion. 130 of these businesses came from the Russian Federation, according to the report titled “The Token Spring of Central & Eastern Europe”.