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Is cryptocurrency exchanger legal?

In the wake of interest in cryptocurrencies, many projects one way or another connected with the crypt have emerged, including stock exchanges and cryptocurrency exchangers. Of course, this is accompanied by many risks. Let's see what you can really be held accountable for.

Not only Roskomnadzor can block the site

Government agencies are always alert, and our main work resource can be blocked at the initiative of several government agencies at once. Thus, the Prosecutor’s Office is increasingly applying to recognize the information posted on the Internet about cryptocurrency as prohibited for distribution in the Russian Federation.

Court decisions state the following reasons for blocking resources related to cryptocurrencies:

  • An indication of how to purchase cryptocurrency. (The judgment of the Anapa City Court of Krasnodar Territory dated February 25, 2016 in case No. 2-869 / 2016);

  • Information on cryptocurrency investment. For example, the court banned the information in the article entitled “How to correctly invest in Bitcoin, blockchain and cryptocurrency? We buy Bitcoins". (judgment on case No. 2a-696/2017 dated July 31, 2017. Nariman District Court of the Astrakhan Region);

  • The information on the site contains the concept of Bitcoin or information about electronic currency, cryptocurrency or virtual currency. (judgment of the Petrograd District Court of St. Petersburg dated July 17, 2017, in case No. 2-3435/2017);

  • Information promoting tax offense. (judgment of the Nariman District Court of the Astrakhan Region dated August 15, 2017 in case No. 2a-705/2017);

  • Information on the exchange rate and the phrase "In order to buy bitcoin on the site, it is not necessary to register, it is enough to indicate the amount and currency you are planning to purchase, the payment method, email address and bitcoin wallet address." (judgment of the Primorsky District Court of St. Petersburg dated June 07, 2017 in case No. 2-7811 / 2017);

  • Publications and content with information on the use, legalization or payment with cryptocurrency. (judgment of the Zheleznodorozhny District Court of Krasnoyarsk dated July 12, 2016 in case No. 2-4124 / 2016);

  • Information on the cryptocurrency exchange. (judgment of the Primorsky District Court of St. Petersburg dated June 01, 2017 in case No. 2-8532 / 2017).

  • These are already the classic themes of money surrogate, shadow economy, the possibility of using cryptocurrency for criminal purposes, supporting terrorism and constructing the Death Star.

Among all these court judgments we find those related to blocking the websites of exchanges. They say: “Bitcoin turnover is provided by organizations and entrepreneurs accepting cryptocurrency as a means of payment for services rendered or goods provided, or traders who exchange them for various currencies (rubles, US dollars, euros, etc.) on online exchanges. The absence of a controlling center in cryptocurrency systems makes it impossible to appeal or cancel an unauthorized transaction, and the actual location of the cryptocurrency outside the legal field does not provide an opportunity to implement legal mechanisms to ensure the fulfillment of obligations by the parties to the transaction” (judgment in the case No. 2-3459/2017 dated July 17, 2017 Petrogradsky District Court of St. Petersburg).

But which judgments are really rare? Those that have been disputed. Only a few tried to challenge the decisions of the courts. Among them are successful ones (ruling on appeal of the Sverdlovsk Regional Court in case No. 33-6398 / 2015) and unsuccessful ones (ruling on appeal of St. Petersburg City Court of February 13, 2017 in Case No. 33-2537 / 2017), but their presence makes it possible to fight for your rights. That is, of course, if you haven't violated the law.

And if you think that registering a company with BVI will be enough to get out of sight of the authorities, then you are mistaken. The decision to block the site on the territory of the Russian Federation can be made regardless of where the company is registered and what contractual scheme it uses.

Finally, the FAS may look into your company if the advertisement contradicts the law on advertising. For example, in accordance with paragraph 1 of Part 5 of Art. 5 of this law, advertising does not allow the use of foreign words and expressions that may distort the meaning of the message. Violation of the law on advertising incurs a fine of 500,000 rubles.

Thus, the FAS has already analyzed cryptocurrencies and recognized the advertising of a mining farm with the following text: "Cryptocurrency investment. Bitcoin, Etherium, Zcash. Building and configuring mining farms. telephone 8919-647-34-89” as not complying with the requirement of Part 1 of Article 28 of the Advertising Law, according to which advertising of banking, insurance and other financial services and financial activities must contain the name of the company or name of the person providing these services or carrying out this activity and held the company accountable.

Keep Tax in mind!

Think over the tax scheme very carefully, that is, how the project will pay taxes and how users will pay. Write it out in every detail. The error can come at a cost, for example, entail additional taxation, taking into account fines and penalties.

Tax services and banks are very zealous in collecting taxes, so they monitor sources of money not only with companies, but also with individuals. Meaning that the Tax pay close attention to money transfers from a company to an individual. If such receipts are regular, you are sure to get under the magnifying glass.

It is also worth remembering that legal entities and entrepreneurs who pay individuals incomes must withhold personal income tax from them, that is, perform the functions of tax agents. The problem is that it is extremely difficult to determine whether a user has a profit in bitcoin operations. Legislation, of course, is of little help here.

If we consider the existing analogies, operations with securities will be the closest in legal nature. In this case, the tax is imposed on the excess of the market value of these securities over the amount of the actual costs of their acquisition (subclause 3, paragraph 1, Article 212 of the Tax Code of the Russian Federation). The market value of securities is determined taking into account their market price marginal limit of fluctuations. The date of income receipt in the form of material benefits is the date of the security purchase (subclause 3, clause 1, article 223 of the Tax Code of the Russian Federation). That is, the date of the security ownership transfer to the buyer. However, cryptocurrencies have no market value in the legal sphere since they do not circulate in organized markets.

To minimize the risks, it would be possible to oblige the user to report on the profits of each particular operation. Currently, there is no relevant legal practice. In this regard, there is a risk of charging the exchange for non-fulfillment of the tax agent's obligation, since the exchange is the user's tax agent and, if a user has income, the exchange is obliged to retain the personal income tax of 13% when the income is paid, under art. 24 of the Tax Code of the Russian Federation.

The Prosecutor's office will participate as well

Is business concerned with the issue of criminal liability for working with cryptocurrencies? Definitely. There is no definite practice at the moment and we cannot say which particular articles can be incriminated to the organizers of exchanges and exchangers, but here is a list of the most probable ones.

  • Art. 174 of the Criminal Code (Legalization (laundering) of money or other property acquired by other persons by criminal means). Based on information from the Bank of Russia on September 4, 2017 "On the use of private" virtual currency "(cryptocurrency)" and a letter from the Federal Tax Service on October 3, 2016 N OA-18-17 / 1027 “On operations related to the acquisition or sale of cryptocurrencies using currency values (foreign currency and foreign securities) and (or) currencies of the Russian Federation”. We can draw several conclusions:

  1. Bitcoin payments are often associated with illegal activities, actions to receive payments may be regarded as offenses under Articles 15.27 of the Administrative Offenses Code of the Russian Federation and 174 of the Criminal Code of the Russian Federation. - Performing financial transactions and other transactions with money or other property, knowingly acquired by other persons in a criminal way, in order to give a lawful type of possession, use and disposal of specified money or other property.

  2. Cryptocurrency transactions in the Russian Federation are not directly prohibited, but such actions will be considered as “potential involvement in conducting suspicious operations in accordance with the legislation on countering the legalization (laundering) of proceeds from crime and the financing of terrorism”

The prosecutor's office has repeatedly issued warnings to companies accepting bitcoins and this has been vigorously discussed in the media.

So the prosecutor's office of the Sverdlovsk region made its contribution. In a letter dated August 31, 2017 “On the issue of using “cryptocurrency”, the department clarifies that the use of virtual currency in transactions is the basis to classify such transactions as transactions aimed at legalizing proceeds from crime and financing terrorism.

To minimize the risks, it is worth pointing out in the service contract that the funds, and in our case, the cryptocurrency, are obtained legally.

  • Art. 172 of the Criminal Code (illegal banking). We found only one instance of the opened criminal case in September 2017, it is unknown whether the case received the court hearing. We note only that the cryptocurrency is not recognized in cash, and therefore prosecution under this article is unlikely.

  • Art. 199 of the Criminal Code of the Russian Federation (evasion of paying personal income tax as a tax agent). There may be an issue on the need to fulfill the duties of a tax agent in the course of activities of the exchange. If such a duty is neglected, you can find yourself involved in a criminal case.

In general, it's fair to say that the activity of a cryptocurrency exchange does not directly violate the current legislation of the Russian Federation, but there is no clear position of the state on this issue. Therefore, companies that engage in cryptobusiness must take into account a large number of risks from website blocking to tax and criminal prosecution.


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