The Kremlin plans to establish a blockchain-based payment system within the BRICS countries. Yury Ushakov, advisor to the Kremlin, emphasized the importance of this autonomous payment system, which uses technologies such as blockchain and digital currencies. The move aims to create a reliable, apolitical and practical payment infrastructure for governments, businesses and individuals.
Ushakov claimed that the main objective in the following year would be to strengthen the position of the BRICS countries in the global financial and monetary system. Referring to the 2023 Johannesburg Declaration, he emphasized the leaders’ commitment to prioritizing domestic currency settlement and strengthening correspondent banking networks. The focus remains on strengthening the Contingent Reserve Arrangement, especially on diversifying the dominance of the US dollar.
A look at the crypto regulatory situation of BRIC countries
The Brazilian crypto regulatory landscape: a prelude to the BRICS move
Before delving into the specifics of the BRICS initiative, it is crucial to understand the varied regulations within member states. Brazil, for example, underwent a significant transformation with the entry into force of Law No. 14.478/22, Brazil’s law on virtual assets. This legislation, which came into effect from June 2023, marked a crucial shift from the previously unregulated status and provided a legal framework for crypto and virtual assets.
Presidential Decree No. 11,563/23 designated the Central Bank of Brazil (BACEN) as the main regulatory authority for virtual assets, with the exception of tokenized currencies and Central Bank Digital Currencies (CBDCs). Brazil’s Virtual Assets Law has paved the way for regulatory guidance from both BACEN and the Brazilian Securities Commission (CVM), with a focus on securities classified as ‘receivables tokens’ or ‘fixed income tokens’.
Russian crypto laws
Russia, another BRICS member, is navigating the crypto landscape distinctive regulations. Vladimir Putin’s approval of digital financial assets (DFA) legislation in July 2020 marked a milestone, legalizing cryptocurrency transactions and restricting their use as payment for goods and services. The Bank of Russia’s strict reporting requirements and supervision illustrate a comprehensive approach to ensuring transparency and compliance.
The legislation defines cryptocurrency as “a collection of electronic data that can be accepted as a means of payment,” emphasizing its role as an investment rather than a means of exchange. The obligation for individuals and companies to report transactions above a certain threshold to tax authorities reflects a commitment to prevent unlawful activities, including money laundering.
Chinese crypto laws
China’s proactive attitude towards blockchain development is in line with the broader vision of the BRICS. The government’s encouragement of blockchain technology in 2019 and the passage of cryptographic legislation in 2020 showed a strategic move towards embracing digital innovations. However, the ban on initial coin offerings (ICOs) in 2017 reflected a cautious approach to prevent illegal fundraising.
The Chinese regulatory framework distinguishes between the acceptance of blockchain technology and the ban on certain crypto-related activities. Although ICOs are banned, owning cryptocurrencies is generally legal. The government’s recognition of cryptocurrencies as virtual commodities, despite restrictions on token financing and trading platforms, indicates a nuanced perspective.
The Indian cryptocurrency landscape
India’s position on cryptocurrencies remains in flux, with ongoing debates and regulatory developments. The lack of a central regulatory body overseeing cryptocurrency payments adds a layer of uncertainty for investors and businesses. Finance Minister Nirmala Sitharaman’s plea for taxing digital assets reflects a recognition of the economic significance of the sector.
While the Reserve Bank of India and government spokespersons have declared bitcoin illegal but not banned, the tax framework introduced in the Union Budget 2022 adds additional complexity. Cryptocurrency income is taxed at 30%, with a TDS deduction of 1%, highlighting the government’s attempt to bring some clarity to the sector. However, the future of cryptocurrency in India remains in the hands of the proposed Cryptocurrency Bill 2021, aimed at regulating the fast-growing industry.
South African crypto approach
Unlike the uncertainty in India, South Africa has embraced a favorable regulatory framework for cryptocurrencies. Within it, several exchanges and platforms regulated by the Financial Sector Conduct Authority (FSCA) are active a legal framework. The recognition of crypto assets as “a digital representation of value” by the FSCA in 2022, subject to regulatory rules, reflects a proactive approach to protecting investors.
The introduction of rules by the South African Advertising Regulatory Board in January 2023 requiring explicit warnings about potential financial losses in crypto asset advertisements demonstrates that consumer protection is in place. Furthermore, the taxation of cryptocurrency income in South Africa further legitimizes the sector, with the South African Revenue Service (SARS) taxing profits and losses based on income tax bands.
The future of BRICS
As BRICS countries undertake the journey to establish a blockchain-based payment system, the diverse regulatory landscapes within member states provide valuable insights. While Brazil and South Africa have embraced regulation to provide legal clarity, Russia and China have taken a more controlled approach, ensuring transparency and compliance.
BRICS’ ambitious plan to launch a blockchain-based payment system signifies a collective vision to harness the potential of digital technologies for financial empowerment. The divergent regulatory approaches within Member States highlight the need for a harmonized framework to enable seamless cooperation. As the BRICS moves forward, the world eagerly awaits the evolution of this groundbreaking initiative, poised to reshape the global financial landscape.