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Cryptocurrency and digital asset issuers are now VAT exempt in Russia

Russia has passed a bill exempting cryptocurrency issuers from Value Added Tax (VAT). This move is to further strengthen its pro-crypto stance through its legislation. The lower house of the Russian legislature, the State Duma, passed this bill.

Allegedly, some other services related to cryptocurrency exchanges will also be exempt. The current tax rate for cryptocurrency companies participating in these digital asset related businesses is 20%. Continued sanction from the West wreaked havoc in Russia following the invasion of Ukraine.

Russia has been experiencing a financial crisis and this, in turn, has made it difficult for Russia to carry out international transactions. To boost its economy, Russia has taken a positive stance towards cryptocurrencies to facilitate the growth of the sector.

Crypto VAT exemption details

In addition to the VAT exemption, this bill that has passed states that the income tax rate will be 13% for cryptocurrency exchanges on the first 5 million rubles, currently valued at $93,000 tax base annually, 15% at values ​​that cross the aforementioned level and 15% in general for currency traders.

However, the Central Bank of Russia is on the opposite side of cryptocurrencies, as are other central banks around the world. Despite opposition to cryptocurrencies, the state authorized the first local digital asset platform, Atomyze Russia. After licensing Atomyze Russia, the main lender Sberbank received a license.

Members of the State Duma approved the drafting of the tax law. The bill aims to reduce taxes for cryptocurrency issuers and also helps set tax rates on income received from the sale of the assets. Now, for this bill to become law, the signature of President Vladimir Putin is required.

Once the bill is passed, the details of how digital assets will be managed will be defined. Taxation of digital assets under the bill is analogous to securities taxes at the current time, once the bill is passed some light will be shed on such a position.

Russian banks blocked from the SWIFT system

Russia’s banks have been blocked from the SWIFT system and the G7 Group of Seven countries have recently stopped buying freshly mined and refined Russian gold. This added more pressure on Russia’s financial situation.

In addition, there are other sanctions that have led Russia to default on servicing its external debt. Anti-crypto leaders in the US have the idea that Russia might turn to cryptocurrencies to avoid sanctions, so they insist on a crackdown.

Russia for the first time since 1917 defaulted on its foreign debt. The year 1917 is historic, because in that year the Bolshevik Revolution took place. Russia was given a 30-day grace period but paid no interest on two different bonds.

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Russia prepares to accept payments with cryptocurrencies

Russia is expected to legalize bitcoin and other forms of crypto as payment methods soon, according to the country’s Industry and Trade Minister Denis Manturov.

Russia and cryptocurrencies… a perfect combination?

In a recent interview, he commented that the country is potentially looking to resolve its current cryptocurrency dispute with its central banking system, although he is not sure what kind of regulation Russia will impose later on. He commented:

The question is when will that happen, how will it be regulated, now that the central bank and the government are actively working on it, but everyone tends to understand that… sooner or later it will be implemented, in one format or another.

The move is bringing the goals of bitcoin and its digital counterparts closer to being achieved. What many people are likely to forget is that while Bitcoin and many of its crypto cousins ​​have gained speculative or even hedge status in recent years, many of them were initially designed to serve as payment tools. They were created to sideline checks, credit cards, and fiat currencies, but this has been a relatively slow ride given the volatility that continues to drag them down.

It is extremely difficult to understand when Bitcoin and its family of cryptocurrencies are going to go up or down when it comes to their prices. Many stores and businesses are reluctant to say “yes” when it comes to accepting cryptocurrency payments for this reason, and to some extent, we can’t blame them.

Consider the following scenario: someone walks into a store and buys $50 worth of goods with bitcoin. For one reason or another, the store does not exchange BTC for fiat currency right away, and it takes about 24 hours. From there, the price of BTC drops and the $50 becomes $40. The customer keeps everything he bought, but the store ended up losing money. Is this a fair situation? Not everyone thinks like that.

This is what makes countries like Russia important in their own way. They realize the initial purposes of bitcoin and digital currencies and are trying to turn them into usable tools that ordinary people can benefit from.

The country has received much criticism.

Russia has come under severe scrutiny in recent months as the country reportedly invaded its western neighbor Ukraine. For these reasons, members of the US Congress have been tough on Russia, claiming that it is guilty of war crimes and therefore should not be allowed to have any functioning financial system.

Elizabeth Warren of Massachusetts, for example, has called for cryptocurrency exchanges to reduce their services to people in Russia, with many suggesting further sanctions on the country because they are concerned that Russia may use cryptocurrencies as a means of circumventing current limitations.

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Russia may accept Bitcoin for gas export

Russia is moving away from the dollar and euro as payment options for its energy exports, and Bitcoin has been mentioned as a possible replacement alongside the ruble and national currencies of partner countries. A high-ranking lawmaker has indicated that Moscow may accept cryptocurrencies for natural gas and other resources.

Russian official mentions Bitcoin among alternative settlement methods for his gas

The Russian Federation has taken action in response to unprecedented Western sanctions imposed by the invasion of Ukraine. The energy-rich nation is now looking for other currencies to replace the US dollar and euro in its gas trade.

On Wednesday, President Vladimir Putin announced that Russia will ask “enemy” nations to pay in rubles for the natural gas they buy. EU member states, many of which rely heavily on Russian gas supplies for heating and power generation, fall into this category.

US and European sanctions are hurting Russia’s economy and fiat currency. Some of the measures target access to the global financial market and foreign exchange reserves. The ruble gained some lost ground after Putin’s announcement, as gasoline prices in Europe soared.

“If we can’t store a coin, acquire it, pay with it, why should we exchange it?” Pavel Zavalny, head of the Energy Committee of the State Duma, the lower house of parliament, commented to Russian media on Thursday.

“Gas is just the beginning, it will affect other resources as well. If they want to buy what they pay for either in hard currency, for us that is gold, or in currencies that suit us, which is the national currency”, said the legislator.

Zavalny explained that agreements with friendly countries like China and Turkey can be made with the ruble or its currencies, the yuan and the lira. Serbia may pay in convertible foreign currency or Russian rubles. He further explained:

The set of currencies may vary and this is normal practice. If there are bitcoins, we will exchange bitcoins.

The official added that several European countries are now ready to buy Russian fuel with rubles. “For that, we just need to solve some organizational problems and sign additional agreements. Nothing changes in our obligations under the contracts. If they don’t pay for gas, there will simply be no gas,” said the parliamentarian.

Russia has been trying to reduce its dependence on the dollar even before the military crisis in Ukraine. In October, Deputy Foreign Minister Alexander Pankin told Interfax that Moscow could partially replace the dollar in its foreign exchange reserves and negotiate deals with other fiat currencies and potentially digital assets such as bitcoin. His comments came shortly after Putin himself said in an interview with CNBC that the cryptocurrency could be used for future oil trade deals.