Downside of legalizing bitcoin? From 2021, Russian officials will be required to declare assets held in cryptocurrency as income

Russian officials will soon be forced to declare if they have any crypto-assets, in line with new regulations set to take force in 2021. The new laws will recognize virtual currencies but will not class them as legal tender.

“Starting next year, civil servants will be required to declare [virtual] currencies on an equal basis with other assets,” explained Russian Prosecutor General Igor Krasnov. This means officials will have to indicate the cryptocurrency in their income declarations, allowing the state to keep track of all civil servants’ earnings.

In July, a bill signed by Russian President Vladimir Putin allowed for virtual assets to be counted on a par with physical ones, enabling Russian citizens to legally own cryptocurrencies from 2021. Furthermore, it is hoped recognizing that these assets have value in the real world will help fight corruption, as payments with currencies such as bitcoin are often used to launder money.

Prior to the new legislation, virtual assets were in an unregulated ‘grey zone’. With this rule change, Russians will benefit from having the law on their side, the downside being they will no longer be able to keep their assets hidden. Cryptocurrencies will still be prohibited as a means of payment, however, and so won’t be used in shops any time soon.

Earlier this year, a Russian financial institution made international headlines for issuing a loan secured by cryptocurrency for the first time. The loan, issued by Expobank to businessman Mikhail Uspensky, used the currency ‘Waves’ as collateral. While not being classed as money, it was deemed as “other property” and was therefore accepted.

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