Russia’s new cryptocurrency-related law, “On Digital Financial Assets,” or DFA, seems to have had little impact on the local cryptocurrency industry so far.
In its current form, the DFA law essentially provides legal status to digital assets like Bitcoin (BTC), but prohibits their use for payments in Russia.
As the DFA law is poised to be officially adopted in less than four months, Cryptox talked to major crypto firms operating in Russia to get their take on how the new law can impact their business.
Based on comments from executives at companies like Binance, Waves, Paxful, LocalBitcoins, and Wirex, companies aren’t exactly scrambling to adapt to the new law, largely due to its ambiguous language.
Many in the industry don’t understand the new law
Anton Kozlov, head of the Russian market at Paxful, said that the DFA law has caused a lot of confusion. “Unfortunately, we could not say with certainty that the new law is clear to the industry,” Kozlov said. The executive added that the full impact of the new legislation “is not entirely understood by the industry players.”
Despite the apparent regulatory uncertainty associated with the law, Paxful does not expect it to affect its business because payments is not the core service on the platform:
“Most of the people on the Paxful platform are exchanging cryptocurrency and looking for arbitrage opportunities in the market.”
As reported, Paxful saw a massive spike of interest from Russian users this year. According to Paxful data, the platform’s crypto peer-to-peer (P2P) trading in Russia surged as high as 350% on a year-over-year basis. According to Kozlov, the main reason for the surge is the weak status of Russia’s national currency, the Russian ruble, which “is not a very attractive savings option.”
“Crypto and P2P markets especially, can help solve these personal finance problems and offer people alternative ways to financial freedom, which is why we are seeing a spike in Russian interest on our platform,” he said.
Alexander Ivanov, founder and director of Waves Platform, said that the law has essentially no impact on the industry due to the lack of regulatory clarity:
“The law is hardly clear to the majority of players in the crypto and blockchain industry […] At this point, the law is having neither a negative nor a positive impact on the Russian crypto industry, mostly because there’s no explicit ban on crypto assets, which is the most important.”
Ivanov also noted that regulatory uncertainty is a major impediment to the development of the fast-growing industry of decentralized finance, or DeFi. “Against the backdrop of overall growth in the DeFi segment, an absence of a clear status or rules of the game for cryptocurrencies can be seen as an obstacle to the development of this industry and the Russian economy at large,” Ivanov said.
Shifting to new business models is not a deterrent
Dominique Simon, global general counsel at British crypto payment processor Wirex said that the firm does not anticipate any big changes in its business. “Facilitating crypto payments is only one part of the services we provide at Wirex and disabling this feature will not discourage us from providing services to Russian customers,” Simon stated.
Simon also stressed that at least some regulation is better than nothing, claiming that the DFA law is a “big step towards business certainty and security for our customers.”
He said, “We remain optimistic about providing our services to Russian customers, and once there is more clarity about the licensing regime, we will do our best to navigate the new framework and continue to establish a strong presence in the Russian market.”
On May 19, Wirex launched crypto purchases with fiat credit and debit cards in Russia, allowing users to buy Bitcoin and Ether (ETH) through Visa and MasterCard.
Some see the DFA law as a cause for celebration
Jukka Blomberg, CMO at Finland-based P2P crypto trading platform LocalBitcoins, is confident about the new law, stating, “We welcome the new legislation and see it as positive for Bitcoin and the whole cryptocurrency industry in general.”
According to Blomberg, LocalBitcoins has not seen significant changes on its platform since the law was passed. “Yet the official endorsement to allow people to buy and sell cryptos certainly excites us and definitely creates new opportunities for us as well as the other players in the industry,” he said. As reported, Russia was the top market for LocalBitcoins this year as of June 2020.
Binance still plans to launch its crypto card in Russia
Despite Russia being poised to officially ban cryptocurrency payments in 2021, Binance is still planning to launch its Binance Card in the country. Gleb Kostarev, Binance’s head of operations for Russia and the CIS, announced the plans to Cryptox on Sept. 7.
However, Kostarev said that Binance is not ready to either announce the anticipated launch date or provide any legal comment on the issue so far.
Binance’s plans to launch its card amid the upcoming crypto payment ban is probably the best example of the industry’s feedback to the country’s crypto legislation in its current form. The world’s largest crypto exchange is not going to give up its plans despite the law stipulating the following:
“In the Russian Federation, it is prohibited to distribute information about offering and accepting digital currency as a counterpart provision for transferred goods, rendered work (services) or any other method that allows one to pay in digital currency for goods (work, services).”
According to Kostarev, the current version of the law is “fairly neutral” and does not fully cover all aspects of cryptocurrency regulation. The adopted version of the law also “did not affect Binance’s business in any way,” he said.
As reported, Russia is preparing to pass another law called “On Digital Currency,” or DC, in late 2020. In contrast to the DFA law, the DC bill will purportedly provide an actual regulatory framework for using crypto in Russia. On Sept. 3, Russia’s Ministry of Finance proposed to amend the DFA law to ban all crypto transactions except through inheritance, bankruptcy and enforcement proceedings.
