At present, cryptocurrencies don’t have any legal status and are not regulated in Russia. Yet a company called Artel has managed to officially add bitcoin to its authorized equity capital. Not without giving the entity a hard time, the country’s Federal Tax Service eventually agreed to register the change in its status. According to experts consulted by the Russian business daily Kommersant, the case will not have an immediate effect on the treatment of cryptocurrencies by the state, but it will expand their legal use.
A company has blazed a trail in Russia, successfully convincing the country’s tax agency to accept that its equity capital now includes cryptocurrency. The change in the ownership distribution has been registered after the firm filed a set of notarized documents confirming a new investment was made in digital coins, not fiat rubles.
Investor Buys 5% of Artel’s Equity Using Bitcoin
Artel CEO Mikhail Uspensky told the newspaper the company was joined by an investor who added virtual currency to its equity capital. He bought 5% of the company with 0.1 BTC worth around 60,000 rubles (approx. $940) at the time of the deal. From that amount, 750 rubles in crypto covered the purchase of the investor’s share in the firm’s authorized capital and the rest of the money was transferred to Artel’s operating balance.
Initially, the Russian tax agents rejected the company’s request but Uspensky and his team didn’t give up. They acquired an independent evaluation of the wallet holding the cryptocurrency from a third party specializing in the evaluation of different assets, a company called Veta, and prepared a full set of notarized documents including a protocol establishing the transfer of the wallet’s login details. This time the tax administration had nowhere to go but to accept the documents and register the change of ownership.
“The procedure for company registrations in Russia is declarative”, explained Sarkis Darbinyan, lead legal expert at Roskomsvoboda. The NGO is fighting internet censorship and helping companies from the digital space, including crypto businesses, to overcome various legal challenges. “The law says that share capital can be paid with money, property or property rights. However, state bodies are afraid to deal with bitcoin and make any legally significant actions with it before the legislature adopts a clear position on cryptocurrencies”, Darbinyan told news.Bitcoin.com.
Precedent in Russia, New Case in Europe
The Russian legal expert emphasized that this is indeed the first time the country’s tax authority recognizes a capital deposit transaction in cryptocurrency. “In order for this form of investment to be recognized by the state and the transaction to be registered, it’s necessary to evaluate the e-wallet, issue an act of acceptance-transfer for its login and password, assure the documents at the notary and apply to the tax authorities for the registration of the changes in the share capital”, Sarkis Darbinyan detailed. He further commented:
The possibility to deposit share capital in cryptocurrency undoubtedly has a great potential. This will allow the investment of virtual assets not only in the crypto economy, but also in other traditional non-digital sectors.
According to Ilya Zharsky, managing partner at Veta, difficulties in such cases stem from the lack of a legal framework for cryptocurrencies in Russia. “When the legislative issues are resolved, the number of requests for cryptocurrency evaluation will increase. But for now, we are developing a new practice”, he noted. The law “On Digital Financial Assets”, the main bill in a package of laws dealing with matters related to the crypto space, has been postponed multiple times in the State Duma since last spring. In its latest redaction, the draft has reportedly dropped prior references to cryptocurrencies.
Although Artel’s case is the first of its kind in the Russian Federation, there have been similar precedents in other European countries. In 2015, 45 bitcoins were added to the authorized capital of a company based in the Italian region of Tuscany, after the transaction was confirmed by an auditor and a tax law attorney, Kommersant reminded its readers. And according to Forklog, the Ukrainian law firm Axon Partners formed its share capital with bitcoins in 2016.