Exchangers or Exchange: Experts Reveal Legal Ways to Exchange Cryptocurrency for Real Money

And also in the field of hashrate…

— Do you think digital money has gained a foothold in Russia?

Ogienko: — Cryptocurrency is de facto already an element of the financial system, and in this regard, it is important that people and businesses clearly understand what they are dealing with.

Marinichev: – Your question is such a trick. If you go outside and ask passers-by what they know about cryptocurrency, then nine out of ten will answer that they have heard something about it, but they have no idea how to use it, where to get it and what to do with it at all. Therefore, in my opinion, the level of penetration into the wide financial use of crypto money is extremely low. But the level of penetration into the target audience, which is receptive to this kind of innovation, technologically savvy and economically progressive, can be assessed as quite deep, confident and global. In certain circles, this is a fairly understandable tool. A businessman should not only be in a tie, suit, watch and good shoes, but also with a high level of technological and economic knowledge. Now cryptocurrency is an integral attribute of this level of knowledge.

Agranovskaya: – If we are talking about paying for bread in the store, then, of course, there is no penetration. But nevertheless, interest in the crypt is great. People are looking for alternative forms of protecting investments, their money savings, ways to transfer this money. And since the authorities announced a change in Russian legislation regarding cryptocurrencies and some indulgences for users, I think that interest in digital money will only grow. If we talk about business, then, of course, the cryptocurrency is already being used with might and main.

— In 2021, Russia rose to third place in the world in terms of bitcoin mining. In 2022, according to one cryptocurrency exchange, Russia ranked third in terms of the maturity of the cryptocurrency market. What do we have now? What percentage of the country’s population owns cryptocurrency?

Ogienko: — There are statistics for 2022. One of the Singaporean platforms calculated that about 14 million Russians own crypto wallets. At the same time, they store cryptocurrency for a total amount of 16.5 trillion rubles. These data, of course, may differ from reality, but I believe the real order of numbers is approximately the same. If we take the cryptocurrency mining market, then Russia came in second place in terms of bitcoin hashrate (hashrate is the total computing power of the cryptocurrency network, a mining performance indicator. – “MK”). From 13 to 15% of the global hashrate of bitcoin, that is, the computing power of this cryptocurrency, is concentrated in Russia. This is largely a consequence of the competitive advantages that our country has directly in industrial mining. By the way, President Vladimir Putin spoke about this. According to him, Russia has affordable and predominantly “green”, carbon-free energy resources, trained personnel and a cold climate. All this together gives our country sufficient advantages in the competition with other countries in mining. It is important now not to miss these competitive advantages.

Two and a half articles in the law

— The legal status of cryptocurrency in the country has not yet been determined. Explain: is everything that is happening in the market now legal or not? Do we understand correctly that users still work without relying on laws?

Agranovskaya: “That’s not entirely true. There are literally two and a half articles in federal law. There are also a number of by-laws that somehow relate to the crypt. The definition of the digital currency itself is contained in the law, but it is so vague that it probably deserves some criticism. But this is better than nothing: at least we understand that digital currency can be defended in court. Digital currency is property, which means that the taxation procedure arises. So it cannot be said that the crypt is completely outside the law. Russian miners mostly work legally – to the extent that this is permissible, since there are many gaps in the legislation. But it is not necessary to strictly regulate everything, reinvent the wheel and write many new laws. Sometimes the Central Bank can be of great help in this area with its clarifications. In a good way, everything that we do with cryptocurrency is legal, except for payment, for example, for services. Digital currency cannot be used as a means of payment. Otherwise, please buy and sell – it’s legal.

— This is probably one of the most common user questions: how to withdraw money from a crypto wallet? The withdrawal of a cryptocurrency implies its exchange for real money – rubles, dollars, euros. What are the ways to exchange cryptocurrency for fiat money in Russia?

Marinichev: – In the current circumstances, taking into account the sanctions pressure, as well as restrictions on working with Russian cards from foreign services, these are, of course, transactions: when someone spends cryptocurrency, and someone else who buys it sends a card transfer. Such transactions from card to card are mainly used by all services that are presented on the Internet today, crypto exchanges and crypto exchangers. In general, this is an absolutely legal operation, but it assumes that the recipient of funds on the card must declare this as income and pay personal income tax on it. The problem for Russians is that today we are in a closed financial system. Citizens of Russia have the right to change the cryptocurrency, but they must do it on foreign sites, and not within the country. This creates a certain problem of locking, the transfer of real financial assets. We do not talk about the crypt, because it does not go anywhere and does not travel across the border. Cryptocurrency always stands still, only the system of access to this database changes.

Meanwhile, I have never in my life seen a person who would be equally versed in finance, technology, and the legal status of what is needed. Now, if a person with such triumvirate thinking appears, then we will probably advance deeply and far both in cross-border payments and in any other actions that are related to the crypt, and with legislation on it.

Technologically, for any Russian, all services are functioning, and they are quite legal. Now it will not sound quite correct, but I would say this: the services are located in the border zone. Due to gaps in the legislation, we simply cannot make these actions absolutely legal. But at the same time, they are not illegal.

– Probably, each of the available methods of exchange is fraught with a number of difficulties or risks? Tell about them.

Ogienko: — The main problem of cryptocurrency circulation in Russia is that the exchange, purchase and sale of digital money is not regulated by law. It turns out that there are no guarantees that when such operations are carried out, the controlling and law enforcement agencies will not record any violations against those entities who carry out these operations. Investment in this industry is constrained largely by the lack of regulation. We need changes in the legislation that will explain how, at a minimum, legal entities can exchange cryptocurrency for fiat (legal tender) means, as well as pay tax on this, showing their expenses. We very much hope that in the future this mechanism will be fixed in the Tax Code. Its absence is a huge barrier to investment in this industry, as people do not fully understand how to pay the tax.

Agranovskaya: — We wrote very serious opinions for large Russian banks regarding the risks associated with activities in the field of cryptocurrencies, and asked for opinions from the Central Bank. The Bank of Russia issued one important letter. It says that the risk is determined directly by each bank. The structures themselves decide whether to impose an arrest, whether to stop operations or allow them. Since there are still no general rules for banks, of course, they do not want to work with this tool. The Central Bank also published a report that spoke exclusively about the risks of cryptocurrency. No one talked about benefits. But now the statements of the Central Bank have changed a little. Now we are talking about the benefits that can be – at least in cross-border payments – from digital currency. It is necessary to pass a law. But at the same time, there are already successful operations when people buy and sell digital currency under an agreement.

“If you forgot the key, there is no one to complain to”

— Questions from our viewers and readers. Can I get a tax deduction for transactions with cryptocurrency?

Marinichev: Yes, you can, why not. In Russia, there are even companies that produce an automated service, thanks to which you can pay taxes and take a deduction from transactions that are related to cryptocurrencies. And all this is automatic. In this case, it should be understood that the cryptocurrency itself is no different from other financial instruments used in your daily life. If you have income and expenses, you can always take the difference and pay tax on it.

— Is it possible to make a purchase in Russia, for example, an apartment or a house for crypto money? How are these transactions made?

Ogienko: – The law directly prohibits the use of cryptocurrency in Russia as a means of payment. So the answer is: no way.

— If you can simply lose a card or wallet, is it possible to somehow lose crypto money?

Agranovskaya: – Certainly. First, it’s just property, and it can be stolen by technological means, for example, by hacking the system. Another option is to simply forget the password or lose it. If a flash drive containing the currency was really stolen from you, then you will have to prove that it had a crypt on it, and it was yours. It can be done in a certain way. For example, have a notary certify the page on which it is written that this is your wallet. In general, identification is available in most serious services. There it is immediately clear that the wallet is yours: there is a unique identification number, and you give your data, passport. But if you yourself have forgotten the key, there is no one to complain to. This is your own problem.

By the way, I believe that an apartment, if it is not a regular operation, can be exchanged for cryptocurrency, but only if you make an assessment and indicate in the contract as “exchange of one property for another”. But if you receive a crypt for goods, then this is not allowed by law. Another question: what is the responsibility? It is also not clearly defined.

— What is the best way to withdraw crypto money? All at once or in several runs in small parts?

Marinichev: — It doesn’t matter: in parts or in whole. Do as you wish. Why? Because you are not transferring anything. You simply change the database access key. But, for example, bitcoins themselves do not travel from Russia to America or from America to the United Arab Emirates. This is not happening. They don’t even move from wallet to wallet. This is our worldview, this is how we imagine ourselves: from wallet to wallet – bitcoin flies across the border or across the seas and oceans. But at the technological level, the network works completely differently. Therefore, how much and how you withdraw does not matter either for the network, or for technology, or for bitcoin itself. And I repeat: there is not a single body that would control this transfer of bitcoin from one wallet to another. So it doesn’t matter if you send you one bitcoin, a hundred bitcoins, or a thousand bitcoins, in chunks or otherwise. You are free to do whatever you want with your cryptocurrency.