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- Protective Code: The Constitutional Court was asked to review the rules on digital assets
Protective Code: The Constitutional Court was asked to review the rules on digital assets
Russia is on the verge of significant changes in the regulation of the legal protection of digital assets — the Constitutional Court of the Russian Federation has accepted for consideration the complaint of lawyer Marat Amanliev, challenging the refusal of courts in claims in cryptocurrency cases due to failure to notify the Federal Tax Service (FTS). According to the lawyer, this situation has revealed deep contradictions between the legislation on digital currencies and constitutional guarantees of citizens' property rights and equality before the law. While awaiting a court decision, experts reveal legal paradoxes, as well as explain the reasons for the unique position of the crypto industry in Russia. Details can be found in the Izvestia article.
Constitutional guarantees and limitation of the right to judicial protection
Lawyer Marat Amanliev, managing partner of the law firm Right Side, outlined in an interview with Izvestia the fundamental legal conflict surrounding the cryptocurrency sphere in the Russian Federation. The essence of his complaint to the Constitutional Court is as follows. There are many types of property in civil circulation, and the Russian Constitution guarantees equal protection of property for all. Digital currency is recognized as property, but federal law imposes restrictions on the right to judicial protection of owners of cryptocurrencies if they have not notified the Federal Tax Service about the possession of such an asset.
— No type of property requires informing the state for judicial protection. This approach is unconstitutional, as it puts the owners of the digital currency in an unequal position," explains Amanliev.
Amanliev appealed to the Constitutional Court of the Russian Federation after the lawyer's client was denied a claim due to a statement filed with the Federal Tax Service stating that he is the owner of the digital currency. However, the procedure for executing this kind of notification has not yet been established. The lawyer noted that as a result, "a paradox arises": his client cannot apply to the court, since there is no form that needs to be submitted for this. According to the agency's interlocutor, this violates several articles of the Constitution of the Russian Federation at once.
"The essence of our complaint is as follows: there are many different types of property in civil circulation, be it cars, apartments or jewelry, and the Russian Constitution guarantees equal protection to all owners," Marat Amanliev told Izvestia.
In his complaint to the Constitutional Court of the Russian Federation, the lawyer asked that the legal regulation of judicial protection of digital currency rights be brought into line with the Constitution of Russia, that is, part 6, Article 14 of the Federal Law on the CFA should be declared invalid from the moment of adoption and all cases in which the plaintiffs were denied judicial protection should be reviewed..
However, Larisa Mityashova, head of the legal Department of the Association of Russian Banks (ARB), clarifies in this regard that the right to judicial protection under the Constitution is the right to appeal to the court, and not the obligation of the court to satisfy the claim. At the same time, claims from owners of cryptocurrencies are accepted, but protection is possible only if the tax authorities are notified in accordance with the law.
She adds that such a technique is known in law as "natural obligation", when performance is not subject to compulsory collection.
— The obligation becomes "in kind" if it has not notified the tax authority. Then the right is not subject to judicial protection," she explains.
In modern Russian law, "natural" obligations include obligations arising in connection with games and betting, as well as mandatory claims for which the creditor has missed the statute of limitations.
Elena Avakian, Adviser to the Federal Chamber of Lawyers of the Russian Federation, believes that the provision of the law is clearly discriminatory, limiting the property rights of owners of digital assets.
"Regulators do not have the ability to control the turnover of cryptocurrencies, so they use analogies with obligations from games and betting, which are deprived of judicial protection," she believes.
The Federation Council believes that the need to bring legislation into line with the Constitution is overdue and that it is important to ensure transparent and understandable mechanisms for owners of cryptocurrencies.
"Only an integrated approach combining the protection of property rights and effective tax control will create a stable and fair legal environment for the development of the digital market in the country," said Olga Epifanova, Senator, Arbitration administrator of the Ministry of Justice of the Russian Federation, Chairman of the SDFJR.
Izvestia asked for clarification from the press services of the Constitutional Court and the Armed Forces of Russia, the press services of the Ministry of Finance, the Ministry of Justice and the Central Bank, as well as the State Duma Committee on the financial market.
Legal Paradoxes and Risks for Cryptocurrency Owners
Inna Neminuschaya, a lawyer from ALUMNI Partners, reveals the essence of the trap:
— One fact of failure to notify the tax authority can become a reason to dismiss a claim, while the court often does not consider other facts in the case — this creates injustice and unreasonableness of court decisions.
Although this situation is explained by the need for tax control, the very uncertainty of the notification procedure exacerbates the situation, she believes.
Mikhail Bozhor, an expert from Afonin, Bozhor and Partners law firm, confirms that the procedure for notifying the Federal Tax Service has not been approved, which means that the obligation cannot be fulfilled. He believes that the courts should take into account tax returns and other documents as evidence of notification. After all, it was precisely this imbalance that caused the appeal to the Constitutional Court, the lawyers emphasize.
Tatiana Upir, Managing Partner of Upir Advice Group, notes the complexity of the evidence base.
— Blockchain ensures privacy. Information about crypto wallets is known only to their owners, and there are no procedural mechanisms for confirming rights by third parties," the expert explains.
As a result, the owner's rights often remain unprovable, she points out.
The head of the MFUA Department, Tatiana Satskevich, points out that income from operations with cryptocurrency is subject to declaration and taxation in the form of 3-personal income tax.
The ABCEX crypto exchange points to the inaccuracy of judicial practices.
— The application of part 6 of Article 14 of Law No. 259 to dismiss any claims for possession of crypto is contrary to the letter of the law. There is no injunction against judicial protection in case of theft or fraud with the crypt. Submitting a notification in free form is already proof of good faith, they believe.
Vladimir Vinogradov, CEO of Pro-Vision Communications, cites data from the Central Bank, according to which the volume of the cryptocurrency market in the country reached about 3 trillion rubles ($40 billion) by the beginning of 2024, which means that the importance of addressing legal protection issues is very high.
— There are about 17 million owners of cryptocurrencies in Russia, the market is worth trillions of rubles, but 60% do not know about the need to notify the Federal Tax Service. This leads to legal uncertainty and risks of arbitrary decisions," the expert explains.
Fiscal and state control as the reasons for the special regime of digital assets
From the point of view of financial expert Anastasia Karlova, regulation is closely related to tax policy.
— In Russia, the main focus is on declaring income from mining and operations with cryptocurrency in order to return taxes that previously went abroad. The logic of the regulator is simple: declared — paid tax — received judicial protection," explains the financier.
She adds that changes in tax legislation at the end of 2024 introduced an obligation for miners to register with the Federal Tax Service. Today there are about 20 thousand. miners are officially included in the relevant registry.
Larisa Mityashova emphasizes that the state encourages notification of digital currencies for taxation and turnover control, since there is no central operator capable of providing data to tax authorities. This, by the way, explains the separate, stricter legislation on cryptocurrencies, which is absent for other types of property.
Vladimir Vinogradov adds that the introduction of a regime of "legal isolation" of cryptocurrencies is due to the fight against illegal activities and money laundering, but at the same time it is criticized for violating the principles of equality and embedding digital assets in the general legal circulation.
Prospects and expectations from the Constitutional Court's decision
According to lawyer Marat Amanliev, the Constitutional Court should declare part 6 of Article 14 of the Federal Law "On Digital Financial Assets" invalid, since restricting the right to judicial protection is a violation of the Constitution. This will make it possible to review all the cases in which the plaintiffs were refused, he is sure.
Mikhail Bozhor is more cautious in his assessments.
— Probably, the Constitutional Court will recognize the norm as acceptable, but it will require approval of the procedure for notifying the Federal Tax Service, which will eliminate the paradox of duties, — the lawyer believes.
Kirill Karpov, Senior Lecturer at the Moscow State Law University's Department of Financial Law, points out the importance of the Constitutional Court's position, as it will become a key factor in increasing investor confidence and developing the stock market. He notes that the unification of terminology and the legal regime of digital currency remains an urgent task.
Inna Neminuschaya summarizes the need for changes, as the lack of procedures and inconsistent regulation create conditions for injustice and growing legal disputes. The introduction of clear notification rules and a prudent approach by the courts will help stabilize the market and protect copyright holders, she is convinced.
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