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Bitcoin and other digital currencies may be recognized as digital goods in Russia and taxed appropriately, the Central Bank of Russia has said.
The Central Bank is currently shaping legislation to legalize and monitor bitcoins, and the first version of the regulations may be introduced in the State Duma within a month, the bank's deputy chairwoman, Olga Skorobogatova, said at a May 25 meeting in parliament.
In April 2017, the combined market capitalization of cryptocurrencies reached $30 billion, according to the Coin Market Cap web site that tracks digital currencies. Bitcoin, the largest cryptocurrency, had its market capitalization at $40.6 billion on May 26, according to the Coin Market Cap data.
Skorobogatova expressed concerns that digital currencies circulating in Russia may quickly turn into a threat without a proper regulation.
“Since virtual money is being emitted, which is not provided with a gold reserve or controlled in terms of their quantity, sooner or later it can lead to instability in financial markets,” she said at the meeting of the working group for the Review of the Central Bank’s Annual Report for 2016 in the State Duma.
To identify digital currencies that already circulate in Russia, Skorobogatova suggested listing them as digital goods and applying proper regulations that would clarify taxing, monitoring and reporting issues.
Digital currencies “should be regulated, because volumes are increasing compared to the previous year. If people are engaged in this, they have to pay money for it, and we have to have a clear understanding of how to control this activity,” she said.
The country is joining a global trend in which governments are searching for mechanisms to regulate digital currencies, says Semen Kaploushenko, chief customer officer at KUNA Bitcoin Agency, a digital currency consulting firm that founded a Bitcoin exchange.
“As more and more people are using bitcoins, most [governments] find it necessary to control this process, or at least set up a model for their legal use and taxation,” Kaploushenko told Bloomberg BNA by phone May 26.
Most people use bitcoins for online payments as digital money, but some engage in mining, or bitcoin emission.
Two of these different styles of bitcoin use will require different mechanisms of taxation, Kaploushenko said. “They would have to think over how to tax exchange operations and bitcoin mining separately,” he said, noting that there is “no specific model that can be taken as a standard and applied in any country or region.”
Currently, Russia does not have a proper legal base for the bitcoins use. However, some companies in Russia, including a few bars in Moscow, a taxi service, and some legal consultancies, do accept this digital currency.
In March 2017, Ulmart, Russia’s largest online retailer, announced plans to start accepting bitcoin as a form of payment as of Sept. 1, 2017.
Digital, or online goods in Russia include digital books, online games and software, video courses, and other files that can be sold online. From January 1, 2017 Russia has enacted a law that toughened regulations on selling e-content. The law, which became known as a “tax on Google” law, requires foreign companies to report on their sales in Russia and pay a 18 percent VAT off those sales.
Foreign companies are not obliged to create a legal entity in Russia and can pay the tax via their local partners.
Russia has changed its stance on bitcoins, scrapping the already drafted legislation to ban all bitcoin activities. Instead, Russia’s Deputy Finance Minister Alexey Moiseev said in an April interview that regulators might recognize bitcoins and other digital currencies in 2018 in an effort to combat money laundering.
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