Russian Association of Cryptocurrency and Blockchain has developed a bill on the regulation of crowdfunding and ICO

On December 28, 2017, the State Duma is planning to consider a draft law on regulation of the cryptocurrency market and holding an ICO. On the eve of this event, the Russian Association of Cryptocurrency and Blockchain (RACIB) presented its version of amendments to the legislation for the legalization of crowdfunding through an ICO in Russia.

The text of the bill (docx)
Glossary (xlsx)

RAKIB proposes amendments to the Federal Law No. 209- “On the development of small and medium-sized businesses in the Russian Federation”. Thus, crowdfunding (ICO) is considered as a “non-state infrastructure to support small and medium-sized businesses”, which “operates where small and medium-sized businesses cannot attract bank financing or enter organized trades”. The draft law emphasizes that the main consumers of crowdfunding in Russia are not start-ups, but fast-growing small and medium-sized businesses, which do not necessarily belong to the category of venture start-ups (see article 3, paragraph 10).

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

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

That is, individuals can also participate in distributed financing, as is de facto happening now on the ICO market. By the way, recently the Ministry of Finance of the Russian Federation announced the restrictions that have been made to the draft law on holding an ICO (apparently, this is a different, alternative draft law). In particular, the maximum amount that can be obtained through the sale of tokens will be 1 billion rubles. Unqualified investors (that is, 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 is already included in the draft law on regulation of the cryptocurrency market, which will be presented in the State Duma on December 28.

The RACIB bill sets other limits on financing: “The maximum amount of funds raised from an individual as part of the activities of all Russian legal entities engaged in crowdfunding activities accredited in accordance with this article is into one legal entity during the organization of raising funds by such a legal entity can not be more than twenty million rubles , from a natural person who is an individual entrepreneur - one hundred million rubles, from legal persons - without restrictions.

Certainly, 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 some kind of frivolous fun: this amount is even less than a thousand dollars, that is, there is no talk about normal investment of money, even tokens with cryptocotics are more expensive.

For example, a Filecoin startup (a decentralized cloud storage, where users are paid for storing files) in August raised $ 257 million when placing tokens via ICO. The so-called “qualified investors” (Winklevoss Capital, Digital Currency Group and Y Combinator) participated in the 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 Ministry of Finance insists on.

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

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

RAKIB also proposes “to ensure the safety of investors' funds through the use of special bank accounts and full disclosure in the distributed register of the recipients of financing, electronic access for investors to use crowdfunding and a distributed registry”.

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


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