The Central Bank of Russia has recently released a consultation document based on the development and future of Russia’s digital financial asset industry. This document is mostly based on Russia’s proposed plan to develop their digital financial asset (DFA) market and utility digital rights (UDR), the legal glossary covering these digital assets like cryptocurrencies.
Russia seeks to evidently promote its DFA industry and properly integrate/incorporate into the traditional financial market, thereby increasing the interest in these digital assets and quickening the rate of adoption by Russians. One of the methods stipulated in the document for the development and increased participation of Russians in the digital financial asset market is taxation.
Less Taxes Means More Russians In The DFA Market
People generally do not like taxes, so it is a known fact that an industry with less taxation will attract more investors. Based on this logic, the Central Bank of Russia has plans of offering reduced tax incentives to long-term holders of digital financial assets and utility digital rights.
The reduced tax incentive would be similar to the one offered to people with individual investment accounts, and will predictably bear the same results. The tax cut offered to holders of investment accounts worked well in attracting citizens, who had funds which they had no use of, to the securities market for investment because the taxation of such investment accounts were less.
In the same vein, this planned tax cut for the long-term DFA and UTR holders will also attract long-term investors to the DFA and UTR market. This would consequently create more opportunities in the DFA market, promote the adoption of digital currencies, and immensely reduce operational costs.
The Bank of Russia Also Wants to Properly Identify Digital Asset Investors, In Addition to Other DFA Development Plans
The consultation document also states that the Bank of Russia also intends to improve identification processes of the DFA market, so that the investors (old and new) can all be properly assessed while fraud and scam will be reduced.
The Bank of Russia further explained that these improved identification procedures would further enable Russia to allow foreign digital financial assets into the country, develop the adequate accounting processes for the DFA market, as well as adopt and implement smart contract regulations.
Also, the document also states other plans Russia has for the DFA and UTR market which include
- Tokenization of assets like securities, precious stones, metals, etc. as NFTS
- Listing of DFAs on new and existing exchanges and the promotion of transactions with digital assets, and other plans.
The Bank of Russia admits that these proposals will need to be deliberated upon by the higher-ups before they can be put into action, but it would come as a thing of appraisal if Russia gradually turns to digital assets a lot more than they used.
Recall that earlier this year, the Bank of Russia requested for a ban on cryptocurrency activities. But all that has changed since the invasion of Ukraine, as global sanctions has made Russia realise the need for crypto and other digital assets.