Ministry of Finance of the Russian Federation proposes a prison term for not declaring cryptocurrencies

Cryptocurrencies could be the first type of property that brings a prison sentence if hidden. The new rules are codified in the amendments to the Criminal Code and Code of Criminal Procedure of Russia, prepared by the Ministry of Finance. The department also proposed amendments related to cryptocurrencies to the Tax Code, anti-money laundering legislation, and the Code of Administrative Offenses.

How not to become an offender

On January 1, 2021, the law «On digital financial assets» adopted in 2020 will enter into force in Russia. From January 1, new amendments may come into force too. The legislation obliges owners of crypto assets (investors and traders) to provide the following data:

• A report to the tax service on the receipt of digital currency, transactions with it, and its balances in the crypto wallet, if the amount of transactions with digital currency in a calendar year exceeds an amount equivalent in monetary terms to 600 thousand rubles. (at the market price as of the date of each transaction).
• Information to Rosfinmonitoring on transactions with digital currencies (for miners and crypto exchangers).

For income from operations with digital currency, owners must pay tax, and failure to pay it faces a penalty: up to 40% of the amount of unpaid tax.

Рrison sentence — for hard-core tax evaders

Arrest (to six months) is provided for failure to declare on a major scale. This is considered to be the failure to provide data to the tax authorities more than twice in three years, with the amount of transactions exceeding 15 million rubles.

An alternative to arrest, by a court decision, can be forced labor for up to two years or a fine of up to 300 thousand rubles.

Bitcoin and money laundering: truth and speculation

These amendments are attributable to the fight against money laundering and terrorism: according to officials, it is impossible to trace the owners of cryptocurrencies. But it is common knowledge that the bitcoin blockchain is pseudo-anonymous, and a number of startups successfully identify its users.

Meanwhile, a study by the international analytical company Messari showed that fiat is used in criminal activities 800 times more often than Bitcoin. And the WikiLeaks website has been dealing with offshore deals for many years, and the documents published there show trillions of dollars in tax evasion.

New legislations by the Ministry of Finance threaten thousands of traders and investors operating in Russia, while new measures to counter offshore schemes have not yet been proposed.