Digital Financial Assets (DFA), digital rights, and digital currencies (cryptocurrency) provide businesses with novel settlement and investment instruments while simultaneously heightening regulatory, tax, and compliance risks. In Russia, the legal framework for digital assets is evolving through a regulated DFA infrastructure (operator registries) and experimental legal regimes for specific digital currency operations within international trade activities.

We assist domestic and international companies in developing legally sound models for operating with digital assets, preparing necessary documentation, and protecting interests in legal disputes.

Legal Support for DFA Issuance and Transactions (Issuers, Investors, and Corporate Groups)

We provide end-to-end legal support for DFA projects, including:

1. Conducting comprehensive legal analysis of the instrument (monetary claims, securities rights, or other statutory options);
2. Drafting project and offering documentation;
3. Structuring corporate and contractual frameworks;
4. Navigating interactions and role selection with infrastructure operators;
5. Providing legal expertise for secondary market transactions, ensuring compliance with exchange operator requirements.

Cryptocurrency and Digital Assets: Compliance and Risk Management

The Russian regulatory regime for digital currency remains restrictive. Specifically, legislation prohibits the acceptance of digital currency as counter-performance for goods, works, or services for designated persons, as well as the promotion of digital currency circulation to an indefinite circle of persons.

We help clients evaluate the viability of their business models, establish a robust evidentiary base for the source of assets and transactions, and draft internal regulations and contractual terms designed to withstand regulatory audits and litigation.

Legal Counsel for Industrial Mining and Infrastructure

Our attorneys advise on mining projects in light of evolving requirements, including registry compliance, mandatory information disclosure, advertising prohibitions, activity-based restrictions, and AML/CFT standards (Federal Law No. 115-FZ).

Furthermore, BRACE legal counsel structures secure legal relationships within mining pools and with third-party contractors, covering energy supply, facility management, equipment procurement, hosting, and infrastructure operations.

Tax Advisory for DFAs and Digital Currencies

The tax regime for DFAs includes specialized rules, such as VAT exemptions for DFA realization and specific services provided by infrastructure operators, alongside a distinct framework for "hybrid" digital rights.

We assist in formulating tax positions, managing documentation flow, and designing accounting models, while also representing clients during tax audits and disputes.

Representative Matters

Case Study: Structuring settlements for a foreign trade contract using digital rights.

Objective: To facilitate settlements between a resident and a non-resident using digital rights as counter-performance, while addressing currency control and AML requirements.

Result: Developed a legal transaction model and a comprehensive package of contract documentation. The documents incorporated terms for utilizing digital rights in international trade and complied with mandatory control requirements for transactions where digital rights serve as counter-performance under foreign trade agreements.

 

Case Study: Developing tax positions and compliance frameworks for digital currency income.

Objective: To establish a defensible position regarding income and expenses related to digital currency and mitigate the risk of claims during tax audits.

Result: Established rules for accounting and verifying market quotations on relevant dates, prepared documentation for the origin and movement of assets, and created a roadmap for interacting with tax authorities in preparation for audit activities.

Case Study: Legal structuring of a mining project and equipment placement contractual model.

Objective: To launch an industrial mining operation in Russia, accounting for energy consumption requirements, grid connection agreements, equipment leasing/placement, tax accounting for digital currency income, and compliance with 115-FZ during subsequent asset realization.

Result: Designed a complex legal model for the mining project, including ownership structures for equipment and facilities. Conducted expertise on energy supply agreements and internal control regulations for digital currency operations. Provided recommendations for tax accounting of mining income and documentary evidence to minimize the risk of activity reclassification or claims from regulatory bodies.

 

Case Study: Advising on the issuance and circulation of Digital Financial Assets (DFA) for capital raising.

Objective: To structure a DFA issuance by a Russian company to attract financing from a closed group of investors, considering DFA legislation, corporate and tax regulations, and restrictions on cross-border investor participation.

Result: Developed the legal model for the DFA issuance (type of digital rights, scope of claims, circulation procedure), prepared corporate resolutions and emission documentation, and managed coordination with the information system operator. Conducted an analysis of tax consequences for the issuer and investors, establishing conditions to minimize regulatory and corporate risks during placement and circulation.

Expert Legal Services for DFAs, Cryptocurrency, and Mining

If you are planning the issuance or acquisition of digital financial assets, launching a mining project, facing digital asset taxation issues, or considering cross-border settlements using digital rights or currency, contact BRACE Law Firm.

As part of our legal services, we will promptly evaluate the regulatory environment and compliance risks, providing a strategic roadmap for project implementation within the current legal framework.