BELARUS BECOMES THE WORLD’S FIRST COUNTRY TO CREATE A LEGISLATIVE FRAMEWORK TAILORED TO CRYPTOCURRENCIES AND RELATED VENTURES
Belarus’s High Tech Park has announced the establishment of further favourable regulations for companies operating in the cryptocurrency sector.
Building on its first Decree No. 8 “On the Development of the Digital Economy” (December 2017), Belarus has today introduced additional rules and protections to advance its position as one of the world’s most attractive destinations for cryptocurrency businesses.
The announcement positions the country as playing host to the world’s first dedicated legislative framework tailored to cryptocurrencies and related ventures, providing a legal status for tokens and smart contracts, as well as operations related to mining, keeping, buying, selling, distributing, or exchanging cryptocurrencies.
The framework, which is intended to further encourage the growth of crypto-related ventures in Belarus and establish advanced measures to prevent fraud and financial crimes, includes:
- Tax exemptions. The new framework offers tax free treatment of all crypto transactions and ICOs until 2023, making it advantageous for crypto companies to set up and operate in Belarus.
- Advanced anti-money laundering laws. Under Decree N.8, Belarus has implemented best-in-class Anti-Money Laundering (AML) and Know Your Customer (KYC) measures, positioning the country at the forefront of fighting fraud in crypto-related ventures. Cryptocurrency businesses found to be involved in money laundering will immediately be terminated by state authorities, with additional punishments for banks, payment services or any other financial service providers who may have facilitated such crimes.
- Strict data and customer protection regulations. Decree No. 8 strongly emphasises the protection of personal data, implementing structures that guarantee data protection to the same level as the General Data Protection Regulations (GDPR) in the European Union. Cryptocurrency businesses operating in Belarus are now required to warn customers of the risks associated with their services, adhere to new advertising regulations, disclose any material information affecting customer security, and implement internal control systems for managing risk, cybersecurity and conflicts of interest, among other issues.
- Heightened business standards. All cryptocurrency businesses in Belarus must now meet certain operational requirements, including disclosure of beneficial owners and their meeting reputation requirements, hiring qualified employees, meeting stringent financial stability standards and using technically secure information systems to conduct their businesses. Adherence to all of these standards must also be verified through an extensive audit by a Big Four accounting firm.
Belarus has already demonstrated its proficiency in fostering innovative technology companies in its High Technologies Park (HTP), a special economic zone founded in 2005 with a favourable fiscal and legal system for IT businesses. Decree No. 8 further updated the legal framework of the HTP, exempting IT companies from most VAT and income tax, as a result, companies based in the HTP generated a record £1 billion in revenues in 2017 (over a 25% increase compared to 2016).
In 2018, 200 companies joined the HTP as residents – more companies than in the entire history of the HTP – and IT exports increased by more than 40% over the last year. Residents of the HTP include software engineering provider EPAM, instant messaging service Viber, photo and video filter app Masquerade, which was acquired by Facebook in 2016, and World of Tanks developer Wargaming, whose game boasts over 120 million registered users. New residents also include MapDate, the Belarusian development office of Mapbox, which received a $164 million investment from the SoftBank Vision Fund in 2017, JUNO LAB, the software developer for startup Juno, and Izovac AR, a Belorussian startup in the field of augmented reality.
Belarus’ legislators collaborated with Deloitte, Wenger &Vieli and many other leading advisory firms to ensure the new framework is closely aligned with global best practices.
David Baron, Chairman of the Belarus-US Business Council, commented, “We are looking forward to more international and U.S. tech and blockchain companies doing business in Belarus following the establishment of Decree No. 8 and these new regulations. Many U.S. IT companies already know Belarus as a place to set up their software development development division but Decree No. 8 will position Belarus a top destination for cryptocurrency ventures and value-generating global IT product companies. Of course, will be important for companies that want to establish themselves in the HTP and do business in the U.S. or with U.S. citizens to respect and adhere to U.S. laws and regulations. For example, under U.S.regulations, if a non-U.S. company is operating a cryptocurrency trading platform and allows U.S. citizens to participate, the company must be registered as a money transmitter in the U.S..The U.S. securities laws may also apply to cryptocurrency ventures, requiring that the platform be registered as an alternative trading system in the U.S.”
Martin Hess, Partner, Wenger &Vieli, said “Belarus has drafted a stand-alone, comprehensive regulation for digital assets. Cryptocurrency regulation is the future, because only regulation provides legal certainty. The distributed consensus provided by algorithms is not sufficient. The Belarus approach has the benefit of speed and simplicity, because it does not require an understanding of the whole Belarusian legislation, court and legal practice in order to start a business. The Belarus approach is different compared to other countries. It remains to be seen how the stand alone Belarus regulations will be interpreted and applied. The Belarus regulations will also be assessed in comparison to the relevant legislation for digital assets in other countries. Today, it’s important to ensure that the Regulations, their application and interpretation as well as their amendments and developments are equivalent to the legislation of other important jurisdictions such as US, China, European Union, Japan, Korea, Singapore and Switzerland.”