Belarus: Regulation Of Cryptocurrency In Belarus

Not long ago our associate Gleb Yakushev participated in the seminar for small and medium businesses, which was organized within the United Nations' Global contract project. At the seminar he spoke about the existing regulation of crypto activity in Belarus and answered participants' questions.

Here are some main points of his speech.

No, the use of digital signs (tokens) as a means of payment in the Republic of Belarus is not permitted.

On the territory of Belarus, the legal means of payment is the Belarusian ruble, in some cases it is allowed to use foreign currency. (Part 1, Clause 1, Article 141 of the Civil Code)

The Civil Code and other acts of civil legislation, the Law on currency regulation and control and other acts of currency legislation, acts of the National Bank, Decree No.8 contain no provisions regarding the cases when the use of digital signs (tokens) as a means of payment is allowed in the Republic of Belarus.

Taking into consideration the absence of any references in the civil, currency and banking legislation to the possible ways of using digital signs (tokens) on the territory of the Republic of Belarus, the use of digital signs (tokens) as a means of payment (for example, for the purposes of payment for goods, works, services) will be illegal under the laws in effect.

That is to say, at the moment digital signs (tokens) are, essentially, more an investment instrument (f.e., acquisition for the purpose of keeping until the required level of the digital asset value is reached, or acquisition for the purpose of trading).

The lists of operations that natural persons and legal entities are entitled to perform can be found in clause 2 of Decree No. 8.

Natural persons shall be entitled to own digital signs (tokens) and, subject to the specifics set forth in Decree No. 8, to perform the following operations, such as:

• mining;
• keeping of digital signs (tokens) in virtual wallets;
• exchange of digital signs (tokens) for other digital signs (tokens);
• acquisition of digital signs (tokens), their alienation for Belarusian rubles, foreign currency, electronic money;
• donation and bequest of digital signs (tokens) (part 1, subclause 2.2, clause 2 of Decree No. 8).

Note: the activities in mining, acquiring and alienating of tokens, carried out by individuals independently without engaging other individuals under labor and/or civil law contracts, are not entrepreneurial activities.

The above-mentioned list of operations is full and complete, and therefore, in our opinion, the conduction of any other operations by individuals in relation to digital signs (tokens) on the territory of the Republic of Belarus will be illegal under the laws in effect.

At the same time, Decree No. 8 and other legislative acts of the Republic of Belarus do not provide any legal restrictions, which would prevent from performing other operations outside the Republic of Belarus in compliance with any foreign legislation (for example, the use of digital signs (tokens) as a means of payment), for individuals.

Important: It should be specified that on 21.03.2021 amendments were introduced to Decree No. 8. The powers of the Belarus Hi-Tech Park (HTP) Administration to control the activities of HTP residents carrying out operations with digital signs (tokens), as well as the list of allowed operations with digital signs (tokens) were clarified.

It is explicitly established that it is illegal and prohibited to run entrepreneurial activities of natural persons (individuals), as well as legal entities that are not residents of the HTP, carrying out the relevant activities on:

1. rendering assistance to other persons on the territory of the Republic of Belarus and (or) using information networks, systems and resources of the Belarusian national segment of the Internet to make and (or) perform transactions (operations) with digital signs (tokens) (including acting as a party to such transactions (operations) using the information system operating on the Internet or by granting rights (permission) to other persons to use such information system);
2. acquisition and (or) alienation, including exchange, of digital signs (tokens), except as otherwise provided for in subparagraphs 2.1 and 2.2 of paragraph 2 of Decree No. 8.

A comprehensive interpretation of the legislation of the Republic of Belarus makes it possible to conclude that individuals have the right to perform transactions in respect of digital signs (tokens) solely for their personal needs. Activities of individuals to acquire/alienate/exchange digital signs (tokens), in the course of which they seem to "substitute" crypto exchange or cryptocurrency exchange operators (i.e. assist in making and/or performing transactions (operations) with digital signs (tokens) to other persons) are illegal and prohibited.

Legal entities shall be entitled to own digital signs (tokens) and, subject to the specifics established by Decree No. 8, to perform the following operations:

1. create and place their own digital signs (tokens) in the Republic of Belarus and abroad through HTP residents engaged in the relevant kind of activity;
2. keep digital signs (tokens) in virtual wallets
3. to acquire, alienate digital signs (tokens), as well as to perform other transactions (operations) via HTP residents who perform the function of crypto-platform operators ("cryptoexchanges") and operators of cryptocurrency exchange ("cryptoexchangers") (part 1 subparagraph 2.1 of paragraph 2 of Decree No. 8).

This list of operations is also full and complete.

The main thesis with regard to transactions performed by legal entities is that all transactions with tokens (purchase, sale, exchange, etc.) except storage, should be performed exclusively through HTP residents, whose business project states the corresponding type of "crypto-activity" (for example, crypto exchange).

Major regulated crypto-businesses are:

• cryptoplatform operator ("cryptoexchange"),
• cryptocurrency exchange operator ("cryptocurrency exchanger"),
• ICO organizer (this type of activity covers the cases when a company provides services for "digitalization" of assets to third parties (whether residents or non-residents)) and mining.

In pursuance of Decree No. 8, a number of decisions of the HTP Supervisory Board were later adopted, which specified requirements and conditions for the companies engaged in the above-mentioned types of activities.

The key requirement for crypto-businesses in Belarus is that all these companies must be residents of the Belarus Hi-Tech Park and meet the established requirements.

Mining is a separate type of activity, which residents of the HTP are entitled to carry out (paragraph 31, clause 3 of the HTP Regulation). Thus, legal entities (companies) in the Republic of Belarus have the right to engage in mining activities only after obtaining the HTP resident status. At the same time, obtaining a special permit (license) for mining is not required, as mining activities are not referred to the licensed activities in accordance with Decree No. 450.

The procedure for obtaining the HTP resident status is subject to the Regulations on HTP. In contrast to other types of activities, connected with the circulation of digital signs (tokens) (for example, the activities of a cryptoplatform operator), the acts of the HTP Supervisory Board do not provide for special requirements to applicants who intend to engage in mining activities.

In order to obtain the HTP resident status a legal entity shall submit to the HTP Administration among other things an application and a business project which it is proposed to implement as a HTP resident, and prepared according to the form established by the Resolution of the Council of Ministers dated March 27, 2006 N 403 (Paragraph 3, clause 4 of the Regulations of the HTP).

Decision on granting of the HTP resident status to a business entity shall be made by the HTP Supervisory Board and only if the criteria of importance and significance to the state of implementation of its business project are established (Clause 7 of the HTP Regulation). In addition to the Resolution of the Council of Ministers of 27.03.2006 No. 403, when preparing a business project applicants should additionally follow the Methodological Recommendations on Preparation of Documents to be Submitted for Registration as a HTP Resident, which are placed on the HTP official website.

Since mining is a specific type of activity and differs from the "classic" business models of IT companies (custom, product software development), the business project of a legal entity intending to carry out mining activities in the HTP will have its own peculiarities.

For the purpose of justifying the applicant's criterion of importance and significance to the state of the implementation of its business project, applicants, according to the authors' opinion, are recommended to set forth in the business project, inter alia the following points:

• digital signs (tokens) that are targeted for mining;
• a detailed technical description of the equipment to be used for mining (manufacturer, supply sources);
• indication of the software to be used for mining;
• description of the electric power sources;
• calculation of the annual cost of electricity within the planning horizon;
• calculation of the volume of digital signs (tokens) with an indication of their type, planned to be mined by the applicant annually within the planning horizon;
• sources of funding for the applicant's activities at the initial stage of development.

It should be noted that HTP resident has the right to alienate digital signs (tokens) mined as a result of mining only through HTP residents, who carry out the activities of cryptoplatform and cryptocurrency exchange operators.

There are no restrictions on mining for individuals.

In addition, the state provides the following benefits:

1. Digital signs (tokens) are not subject to declaration (part 2 subclause 2.2 of clause 2 of Decree No. 8)
2. Until January, 1, 2023 incomes of natural persons from mining and alienation of digital signs (tokens) are not considered taxable items with income tax (paragraph 3 part 1 subclause 3.1 clause 3 of Decree No. 8).

We can advise you on all issues of taxation and organization of crypto-business in Belarus.