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Russia goes easy on crypto tax as sanctions heat up

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TL;DR Breakdown
  • The draft law proposes to reduce the value-added tax (VAT) paid by local crypto firms by 35%.
  • To mitigate financial penalties, Russia is promoting the greater adoption of cryptocurrencies.
  • Since the conflict in Ukraine broke out, crypto markets have experienced a 46 percent decline.

On June 28, members of Russia’s parliament approved a crypto-friendly draft bill. Should it become law, Russia will exempt crypto-asset issuers from value-added tax (VAT). The current tax rate for firms engaging in deals involving virtual currencies is 20%. Sanctions from the west have continued to ravage Russia since the Ukraine invasion. Financial limitations are making it difficult for Russia to transact internationally. As a result, the country is adopting virtual currency to uphold its independence.

According to the proposed rate, this percentage will fall to 13 percent. The change will affect Russian exchanges on the first 5 million rubles (about $94,000) yearly transaction. Besides, businesses dealing in foreign exchanges and crypto assets will be subject to a VAT of 15%.

Russian federation adopts cryptocurrency

The Russian central bank, much like the majority of other central banks worldwide, is opposing cryptos. Yet, in February, the state-licensed the first local digital assets platform, Atomyze Russia. Shortly after that, they issued another license to the top lender Sberbank.

Besides, the members of the State Duma have given their approval to a draft tax law. The bill reduces taxes for crypto issuers and defines tax rates on income received from the sale of crypto assets. Yet, for the bill to become law, the upper house must examine it first and then submit it for signature by President Vladimir Putin. If they approve the bill, it will lay out specifics for managing digital assets. Also, it will check on what the government refers to as utilitarian digital rights (UTR), which it views as being analogous to securities.

As a result of Vladimir Putin’s invasion of Ukraine, there are severe financial constraints in Russia. The conditions have continued to limit the country’s ability to conduct business worldwide. Thus, the gap prompted the government to take action. The Major Russian banks have restricted their access to the SWIFT international payments route.

In May, Russia began laying the ground for the authorization of cryptos to settle foreign debts. According to reports, the Russian Ministry of Finance was mulling over the possibility of using digital assets. However, their focus was on foreign payments if these assets became lawfully acceptable. It is unknown whether the ministry has concluded on the issue.

Anti-crypto Politicians in the United States have used the notion that Russia will pivot to crypto to avoid sanctions. They insist on the crackdown on digital assets, but this has not occurred.

This week, Russia defaulted on its foreign debt for the very first time since 1917. 1917 has been historic to Russia since the Bolshevik Revolution took place. Russia’s financial woes are only worsening due to this development. During a grace period of 30 days that ended on June 26, Russia could not pay the interest due on two different bonds.

Crypto downfall continues

The crypto markets have experienced a decline of 46% since the conflict in Ukraine broke out. As a result, there is a decrease of more than $800 billion in total market cap to its present levels. The market capitalization has dropped to $954 billion, a decrease of 1.4 percent on the day, during the Asian trading session on Wednesday morning. This marks a continuation of today’s downward trend in the financial markets.

Bitcoin (BTC) is still trading much below various historical price models, and the current price of $20,371 puts it squarely in the “bear zone” category. Ethereum (ETH), on the other hand, has had an even steeper decline, falling by a further 2.4 percent during the day and reaching a price of $1,151. It is highly doubtful that there will be any melting of the crypto winter ice. This is because the general macroeconomic conditions, produced mainly by the pandemic and the war, are yet to improve.

Nellius Irene

Nellius Irene

Nellius Irene is a cryptocurrency investor and journalist who has been in the nascent space since 2018. She has researched and written on several crypto-related topics including non-fungible tokens (NFTs), decentralized finance (DeFi), fundraising, mining, etc. Her major focus is covering regulatory events that are capable of shaping the entire crypto ecosystem.

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