The Finance Ministry in Moscow is pushing to legalize decentralized financial organizations to attract capital to Russia’s regulated market for digital assets. The department hopes this would allow some of the liquidity in the decentralized finance (defi) and crypto space to be invested in Russian digital financial assets (DFAs).
Russian Government Looks to Defi Space for Investment Capital
The Ministry of Finance of the Russian Federation is considering the possibility of legalizing activities of decentralized financial organizations referred to as ‘defi DAOs’ (Decentralized Autonomous Organizations) in a report by the Interfax news agency. The ministry believes the move would allow some of the liquidity in that sector to transfer to the market for Russian digital financial assets (DFAs).
Under Russia’s current law on “Digital Financial Assets,” which went into force in January 2021, the term DFAs covers digital coins and tokens that are launched by legal entities on private blockchains run by authorized operators, as opposed to decentralized cryptocurrencies like bitcoin. The DFA market has already exceeded 25 billion rubles ($260 million), RBC Crypto revealed, quoting the Bank of Russia.
“We actively advocate for the development of DFAs, but we understand that DFAs alone will not ‘fly’,” the director of the Department of Financial Policy at the Finance Ministry, Ivan Chebeskov, was quoted as stating during a panel discussion at Crypto Summit 2023. He further elaborated:
We need a link between DFAs and the world of decentralized finance in order to use the liquidity that already exists in defi, the liquidity in crypto assets that citizens already have, so that through these assets they can invest in DFAs in accordance with Russian legislation, invest in the Russian economy, in Russian assets.
Chebeskov remarked that the DFA sector is still fragmented, with 10 platforms issuing DFAs currently registered with the Central Bank of Russia. He thinks their number should be reduced or there should be a “single aggregator of these platforms, which ideally would also have access to decentralized finance and crypto assets so that these assets could be used for investments in DFAs.”
“Then, in my opinion, this market has enormous potential and enormous opportunities for investment, including in our economy,” Chebeskov said. “We understand that in order for both DFAs and decentralized finance in general to develop more actively, the DAO needs to be legalized,” he pointed out, adding that existing legal entities can be classified as digital DAOs, if they meet certain criteria, without introducing new legal definitions for them.
Defi DAOs are decentralized autonomous organizations that operate in the defi space, Interfax noted. They are using blockchain technology and smart contracts to automate and manage financial transactions without the need for a centralized intermediary. Participants in DAOs can take part in decision-making and the collective management of a project.
Do you think Russia will legalize DAOs working in the defi space? Share your expectations in the comments section below.
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