Russia is Unable to Decide Whether Cryptocurrency is a Legitimate Property

A recent case revealed confusion in the Saint Petersburg district court when the court refused to force extortioners to return stolen cryptocurrency from a victim. The event was carried out by one Eugeny Prigozhin and his partner Petr Piron. The two men, pretending to be officers of the Federal Security Service (FSB), extorted both cash and cryptocurrency from an over-the-counter trader for an unnamed cryptocurrency.

The man was forced to give up about 5 million rubles in cash, along with 99.7035 bitcoins, as well as some BitShares and DigiByte tokens which were transferred to the extortioners’ digital wallets. The rubles amount is equal to more than $70,000 whereas the bitcoin alone is worth more than $900,000.

The FSB is the succeeding agency to the Russian KGB and is a counterterrorism and law enforcement agency. The two men threatened the victim that they would torture him and told him that they had already opened a felony case against the trader. The live threat of being beaten and the possibility of jail seemed to have had the effect that forced the trader to give up all the assets.

As per the court ruling, the man got back the money that he gave up in rubles. However, that is the only money he got back as the court did not provide any ruling on the cryptocurrency as they did not recognize it as a legitimate asset. The court’s website does have information on the ruling, but no official text providing details of the decision is present on the website.

The press release from the court, which came out of their Telegram channel, only mentions the conviction that occurred on June 30. The press release did provide some context on the decision regarding the cryptocurrency not being returned. The press office said that the reason for not providing a ruling for the cryptocurrency is the fact that it is not a legally recognized property in the Russian law. Due to that, the courts cannot treat it as a legal property when handling criminal cases.

According to one of Russia’s top crypto-savvy lawyers Mikhail Uspenskiy, the decision is simply a mistake made by the courts. He said, “The stance that cryptocurrency is some kind of a dummy and has no legal significance is deeply flawed and erroneous.” Mikhail Uspenskiy is also the deputy head of the Chamber of Tax Consultants in Russia.

Uspenskiy also pointed out that crypto was in fact considered as a type of property by the Russian courts in previous criminal cases. These cases included ones where blackmail was used to extort bitcoin or even when bitcoin was exchanged against bank notes which turned out to be fake.

Similarly, another case that the courts went through was when the owner of ICOadm.in, a bogus platform for investments defrauded several investors and took their cryptocurrencies. The case was filed by the ICO investors who participated in the investment. The original ruling did not recognize the crypto as legitimate assets, and the appeal for the case also backed the original ruling. However, it was noteworthy that the appeal did refer to the cryptocurrency as an “other kind of property.”

Further information provided by the appeal court said that crypto did not have any legal standing, either as an asset, or a property, or a money surrogate, or even information, as per the Russian law.

However, this view may soon change as the Russian parliament, the state Duma, gets ready to deal with several draft bills that were introduced in May. The main target of the bills is to give legal status to cryptocurrencies and have them treated as a form of property. However, another thing worth noting is that the bill also asks for prohibition of using any crypto infrastructure that may be Russia-based.

This would greatly hinder the performance that crypto could have in the country. Therefore, it is quite natural to see that a lot of parties have shown opposition to these bills. This includes the Ministry of Economic Development of Russia, the country, Ministry of Justice, and all the cryptocurrency advocates in the Russian Federation.

A confidential source who worked on the drafting of these bills shared a comment on the bills as well, saying that “The Bank of Russia does not understand how to control crypto. Rule number one: if you can’t control something, ban it.”

Sarkis Darbinyan, an attorney who focuses on IT related cases while working with the Digital Rights Center, a Moscow-based law firm said, “In fact, bitcoin gets the same status as marijuana. You can use it in a limited fashion under the close eye of the state but can’t talk or write about it.”

Another big problem that this law could create is to wipe out the complete set of small-sized miners. A source warned that “Everyone who has less than $50,000 worth of mining equipment will be swept out of the market into the black – not even grey – zone.”

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