The Russian cryptocurrency and blockchain association has developed a bill on the regulation of crowdfunding and ICO

    On December 28, 2017, the State Duma is planning to consider a bill on regulating the cryptocurrency market and conducting an ICO. In anticipation of this event, the Russian Association of Cryptocurrencies and Blockchain (RACIB) has presented its own version of amendments to the legislation to legalize crowdfunding through an ICO in Russia.

    Bill text (docx)
    Glossary (xlsx)

    RAKIB proposes to amend Federal Law No. 209-FZ “On the Development of Small and Medium-Sized Enterprises in the Russian Federation”. Thus, crowdfunding (ICO) is seen as a “non-governmental infrastructure to support small and medium-sized enterprises,” which “operates where small and medium-sized businesses cannot attract bank financing or enter into organized bidding.” The bill emphasizes that the main consumers of crowdfunding in Russia are not startups, but a fast-growing small and medium-sized business, which does not necessarily belong to the category of venture startups (see article 3, paragraph 10).

    The proposed amendments introduce into the legislation the concepts of distributed registry and distributed financing .

    In particular, the participants in distributed financing are citizens, individual entrepreneurs and legal entities whose funds are raised by accredited crowdfunding sites as part of crowdfunding activities using a distributed registry.

    That is, individuals can also participate in distributed financing, as this is happening in the ICO market now. By the way, recently the Ministry of Finance of the Russian Federation announced the restrictions that have been introduced in the bill on ICOs (apparently, we are talking about another, alternative bill). In particular, the maximum amount that can be obtained through the sale of tokens will be 1 billion rubles. Unqualified investors (i.e. individuals) will be able to invest a maximum of 50,000 rubles, and there will be no restrictions for qualified investors. The Ministry of Finance noted that this item has already been included in the bill on the regulation of the cryptocurrency market, which will be presented to the State Duma on December 28.

    The RACIB draft law sets other funding limits: “The maximum amount of funds raised from an individual in the framework of all Russian legal entities engaged in crowdfunding activities accredited in accordance with this article to one legal entity in the course of organizing the raising of funds by such legal entity cannot be more than twenty million rubles , from an individual being an individual entrepreneur - one hundred million rubles, from a legal persons - without limits. ”

    Definitely, this is a big difference for an individual who is not a qualified investor: invest a maximum of 50,000 or 20,000,000 rubles. The first option from the Ministry of Finance turns investments into a kind of frivolous fun: this amount is less than even a thousand dollars, that is, you can’t talk about normal investments, even tokens with cryptocurrencies are more expensive.

    For example, the startup Filecoin (a decentralized cloud storage where users are paid for storing files) in August raised $ 257 million when placing tokens through ICOs. The so-called “qualified investors” (Winklevoss Capital, Digital Currency Group and Y Combinator) participated in a preliminary closed sale of tokens and bought them for $ 52 million, but the bulk of the investments were provided by small players during the open sale of tokens - in fact, this is the essence the concept of "crowdfunding", which is not very compatible with the concept of "qualified investor", which the Finance Ministry insists on.

    The RACIB proposal describes the crowdfunding procedure (ICO) and also introduces the definition of “crowdfunding venues” - this is a “Russian legal entity carrying out crowdfunding activities accredited in the manner prescribed by the Government of the Russian Federation and included in the state register of accredited crowdfunding venues”.

    To obtain accreditation, the site must meet a number of requirements. For example, for a “person acting as the sole executive body”, at least two years of experience in managing the organization are required. The site of the crowdfunding site should maintain a register of transactions, publish statistical information and the main criteria for selecting projects, and in case of determining the rating of the project - disclose the methodology for determining the rating.

    RACIB also offers "to ensure the safety of investor funds through the use of special bank accounts and the full disclosure in the distributed registry of the economic activities of the recipients of financing, electronic access of investors to invest using crowdfunding and a distributed registry."

    Recall that recently the President of Belarus signed a decree that legalizes the conduct of ICOs at home and abroad, exempts market participants from a number of taxes, and also introduces an English law system for them.

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