Russia’s new cryptocurrency law on digital financial assets, or DFA, appears to have had little impact on the local cryptocurrency industry so far.
In its current form, the DFA mainly gives legal status to digital assets such as Bitcoin (BTC), but prohibits the use of payments in Russia.
Since the DFA was officially passed in less than four months, Cointelegraph has spoken with the major cryptocurrency companies operating in Russia to understand how the new law will affect their business.
Judging by the comments of executives at companies like Binance, Waves, Paxful, LocalBitcoins, and Wirex, the companies are not fully adapting to the new law, largely due to the ambiguity in the wording.
Many in the industry do not understand the new law
Anton Kozlov, head of the Russian market for Paxful, said the DFA Act has caused a lot of misunderstanding. “Unfortunately, we cannot say with certainty that the new law is clear to the industry,” Kozlov said. The administration added that the full impact of the new legislation “is not fully understood by players in the industry”.
Despite its apparent legal uncertainty, Paxful does not expect this to affect the business because payments are not a core service on the platform:
“Most of the people on Paxful exchange cryptocurrencies and look for arbitrage opportunities in the market.”
As reported, this year Paxful sparked great interest from Russian users. According to Paxful, the peer-to-peer (P2P) trading volume in Russia has grown 350% annually. According to Kozlov, the main cause of the wave is the weak position of Russia’s national currency, the Russian ruble, which is “not a very attractive saving option.”
“Cryptocurrency and P2P markets in particular can help solve these personal financial problems and offer alternative pathways to financial freedom for individuals. Therefore, we are seeing an increase in Russian interest in our platform.
Alexander Ivanov, founder and CEO of Waves Platform, said the law has little or no impact on the industry due to the lack of regulatory clarity:
“The law is barely comprehensible to most players in the crypto and blockchain industry […] At the moment, the law does not have a negative or positive impact on the Russian crypto industry, mainly because there is no explicit ban on cryptocurrencies, which is the most important.”
Ivanov also noted that regulatory uncertainty is a major obstacle to the development of the fast-growing decentralized finance industry, or DeFi. “Given the overall growth of the DeFi sector, the lack of a clear set or rules of the game for cryptocurrencies can be seen as an obstacle to the development of this industry and the Russian economy as a whole,” said Ivanov.
The transition to new business models is not a deterrent
Dominic Simon, the UK’s cryptocurrency payments system attorney general, said the company is not expecting major business changes. Simon said, “Promoting the use of cryptocurrencies is only part of the services we provide in Wirex, and disabling this feature will not prevent us from providing services to Russian customers.”
Simon also stressed that some regulations are better than none, and said the DFA is “a big step towards business safety and security for our clients.”
“We remain optimistic about providing our services to Russian clients, and when there is more clarity on the licensing system, we will do our best to navigate the new structure and continue to strengthen our presence in the Russian market,” he said.
On May 19, Wirex launched official cryptocurrency with credit and debit cards in Russia, allowing users to purchase Bitcoin and Ether (ETH) through Visa and MasterCard.
Some see the DFA as a cause for celebration
Yuka Bloomberg, Marketing Director of Finnish cryptocurrency trading platform LocalBitcoins, is confident of the new law and says: “We welcome the new legislation and consider it positive for Bitcoin and the entire cryptocurrency industry in general.”
According to Blomberg, LocalBitcoins has not undergone any significant changes to the platform since the law was passed. “However, the formal commitment to allowing people to buy and sell cryptocurrencies definitely excites us and definitely creates new opportunities for us as well as other players in the industry,” he said. As reported, Russia has been the best market for LocalBitcoins this year since June 2020.
Binance is still planning to launch its digital currency in Russia
Although Russia is ready to officially block cryptocurrency payments in 2021, Binance still plans to launch its Binance card in the country. Gleb Kostarev, Binance’s chief operating officer for Russia and the CIS, announced plans for Cointelegraph on September 7.