The unprecedented Decree on the development of the digital economy, signed by President Alexander Lukashenko in December, officially entered into force on 28 March. The document envisages the beginning of a new Chapter for the country in which any cryptocurrency activities will be provided maximum assistance by the state that in the opinion of the government ought to turn Belarus into a “tech-country”.
Edition of popular American magazine cryptocurrency “Cointelegraph” visited the post-Soviet state to conduct its own investigation. Journalists wanted to find out whether everything is as it seems at first glance, but also delve into real benefits “free cryptoeconomy”.
Belarusian version of “Silicon valley”
While global competition for skilled IT professionals becoming more severe, Belarus offers a number of advantages to attract professionals from around the world. The main incentive to move their business in this country is associated with the tax benefits granted before January 1, 2023. This policy helps to ensure the inflow of foreign capital and, ultimately, to improve relations with the West.
In order to support innovative startups in the country, the government established the high-tech Park (HTP), which is gradually becoming a Mecca for first national cryptocurrency projects.
The international community quickly called the new economic zone “of the Belarusian version of Silicon valley.” The fact that its “residents” — registered IT companies, can take advantage of unique opportunities and benefits for business development at an early stage.
According to the author of the concept of innovation infrastructure of Vsevolod alchevskogo, Technopark will become “one of the most comfortable places in the world for doing IT business”:
“The decree was developed on behalf of the President of the country, really makes Belarus one of the most comfortable places in the world for doing IT. Moreover, the strong positive effect of the decree will be felt not only in the field of IT and affect the whole economy of the country.”
According to statistics, in just a couple of months, the number of “residents” of the Park increased by 88 companies, representing 25%.
About 90 percent of the residents are offshore companies that have been selected by the Belarusian economic zone for a variety of reasons. These include the absence of taxation, state support, free assistance of foreign experts and the simplified registration procedure. An important factor for foreign entrepreneurs was low and fees for work declared local IT specialists.
The terms offered to residents of the Park have a positive effect on the development of the IT sector and the economy as a whole. From 2013 to 2016 Belarus became the leader of the Google Code Jam due to such projects as World of Tanks, MSQRD, Viber, Maps.me, Prisma, Apalon Apps released in PVT.
President gives green light to crypto currency
Helping the development of IT-sector, the government of Belarus has decided not to lag behind more progressive countries and has started the process of digitization of the economy. Known for their strict policy, the President ensures the achievement of progress in a country that historically has never been “progressive”. The power and priority of the Decree shall prevail over existing laws and can operate under any conditions.
What is allowed?
The decree made it legal for any business based on Blockchain technology, as well as any activities associated with cryptocurrencies. Unlike other countries, such as USA, China, Vietnam and Australia, which prefer more stringent regulation in Belarus mining and stock exchange transactions are not considered as “business activities” and are not taxable. In accordance with paragraph 2.2 of the Decree of the President of December 21, 2017 No. 8:
“Individuals have the right to own tokens, and, considering specifics set forth by this decree to perform the following operations: mining, storing tokens, virtual wallets, exchange tokens into other tokens, their acquisition and donation and transfer of inheritance.”
In addition, submit a Declaration of income from transactions with cryptocurrencies until January 1, 2023 optional.
Individual privileges are granted to organizations that are part of the HTP. They are exempt from value added tax (VAT), profit tax (corporate tax) and other taxes. Only 1 percent of the turnover is subject to tax.
Other benefits include simplified procedure for registration of HTP resident company, for which you need only two documents: the business plan and Memorandum of Association. For foreign IT-specialists from entering Belarus visa-free for up to 180 days per year.
The first country to do smart contracts, official documents
“Intelligent contract (smart contract) given the status of official document”, — said Ilya Orlov , General Director TravelChain.
Benefits Decree, may seem really attractive for those who already held its ICO, or, conversely, thinking about running. For a complete sale of the company or tokens should be registered in the territory of the Republic of Belarus and, accordingly, to have an account in a Belarusian Bank or to act through PVT operators, the so-called official cryptocurrency platforms. For example, a cryptocurrency exchange Exrate.by recognized as one of the first “national” platforms.
All operations related to cryptocurrencies, including the reception and distribution investments will also go through specialized exchange offices associated with the Bank accounts. In case if the foreign company is ICO using the HTP resident, the latter may transfer the capital to the client through so-called ” royalty “.
Traps and pitfalls
The main problem that exists is the issue on how global banks would meet international requirements for combating money laundering and financing of terrorist activities. Despite the fact that the Resolution of the National Bank of the Republic of Belarus № 62 adopted on February 15, provides criteria for determining suspicious transactions, these amendments are still pending.
According to the document, suspicious financial transactions may be deemed to be the acquisition of cryptocurrency in excess of 13 000 dollars, if there is no source of income, or in the case of when cash is received without the participation of the HTP resident.
The identification of such transactions using Bank payment cards through remote banking systems or the global computer network, Internet and mobile communication, should be implemented in the next stage of control, which is also not yet available.
Despite the friendly decree, the current reality is that the Belarusian banks do not have infrastructure to work with cryptocurrencies. This is problematic because organizations are forced to look for banks in jurisdictions of other countries that already accept crypto-currencies.
Ilya Salei, a member of the Advisory Board of the Association of Belarus, told Cointelegraph:
“The practice of applying these standards do not exist, since the territory of the Republic of Belarus is almost no one participated in the exchange of cryptocurrency, or the so-called ICO”.
It is unclear how it will regulate the fulfillment of obligations to investors. The same can be said about the authorization procedure and the ICO audit balances encryption.
Another problem lies in the adoption of cryptocurrencies as payment method. Despite the fact that the Decree fully resolves the cryptocurrency, they “cannot be a means of payment”. This means that people can make exchanges only between themselves. For organizations, the state of things will not change — the provision of services and sale of goods in the territory of the Republic of Belarus may be carried out only in Belarusian rubles.
Despite this, many entrepreneurs may prefer to accept those conditions under which only 1% percent of income available in the Fiat, and the remaining 99% in bitcoin.
According to the interactive map Coinmap, in Belarus, about 20 businesses accepting Bitcoin. Mostly cafes and small shops.
Despite the initial legalization of the cryptocurrency industry in Belarus, free distribution of cryptocurrency can only be carried out within the HTP. Full-scale adoption will be possible only after a successful experiment in limited conditions.
The opinions and forecasts
The government and financial structures of Belarus have high hopes for this Decree, which could turn the country into a Paradise for foreign blockchain startups, to ensure the capital inflow and reduce the outflow of IT specialists.
Startups-HTP I expect that by 2020, their ranks replenished by 25-50%, and the profit will increase to $ 1.4 billion.
Despite the fact that international experts consider Belarus to the favourable environment from the point of view of taxation, many of the projects that have already passed the way of tokenization or those who are just planning the ICO continues to apply to OEMs with distrust. Moreover, within three months from the date of entry into force of the decree of the national Bank of the Republic of Belarus can develop a legal framework for further regulation of the industry, which may contain significant changes.
Maxim Galinouski, blockchain expert and chief operating officer SociumTrade, told Cointelegraph:
“In General, it is too early to talk about revolution. The term revolution implies the spontaneity of the events. In the context of the decree on the digital economy we are talking about evolution. All members of the cryptocurrency community needs to exercise patience and endeavour to ensure that this market developed “.
High-tech Park and the Belarusian government tried to create a friendly environment for all members of the cryptocurrency market. It is no secret that the leaders of opinion and the authors of the Decree are under great pressure — they directed the eyes of the world.
The question of regulation of cryptocurrency should be addressed at the international level, based on uniform national standards. International legal norms have the chance to become the basis for the integration of cryptocurrencies in the existing banking system.