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Belarus: Decree Introduces Common-Law Principles and Tax Exempts Mining of Cryptocurrencies

(Jan. 3, 2018) On December 21, 2017, the President of Belarus signed the Decree on Developing the Digital Economy, which is aimed at “creating conditions, under which world-class IT companies would come to Belarus to work on developing new products and technologies that would be in demand worldwide.”  (Decree No. 8 of Dec. 21, 2017, official website of the President of the Republic of Belarus (in Russian; translation by author).)  According to a statement published by the Press Service of the President, the Decree aims to secure investments in the IT sector and IT education and implement new financial instruments and technologies.  (Press Release, Press Service of the President of Belarus, Comments to the Decree No. 8 of December 21, 2017 (Dec. 22, 2017) (in Russian).)

The Decree makes Belarus a jurisdiction with liberal regulation of blockchain technologies.  It provides for the legal status of “smart contracts” and eliminates all legal requirements for operations related to mining, keeping, buying, selling, distributing, or exchanging cryptocurrencies.  Under the Decree, the mining of cryptocurrencies and all other operations in this field are not considered entrepreneurial activities.  Individuals are free to become involved in this business, and income earned from operations related to cryptocurrencies is not subject to financial reporting and is tax exempt until 2023.  (Id.)  Traditional common-law principles and institutions, such as transferable loans, options, loss reimbursement, and a ban on enticement are introduced with the goal of establishing a more favorable and understandable business environment for foreign investors and enabling them to apply internationally recognized legal principles, even if they are not implemented by current Belarusian legislation.  The Decree also grants tax privileges to high-tech companies and eliminates the liability of parent corporations for acts of subsidiaries.  In order to attract better-qualified foreign professionals, companies working in IT are allowed to employ foreign staff without receiving special permission, and foreign employees will be able to stay and work in Belarus without visas and restrictions.  The list of areas with simplified regulation is expanded to include, in addition to the IT sector, biological and medical technologies, air and space industries, and cybersports.  (Id.)

The Decree will enter into force in three months, and its authors believe that IT companies from other countries, initially from Russia and Ukraine, will move to Belarus.  It is also expected that by 2030, IT companies will employ three times as many people as they do now and their income will grow fivefold.  Presently, the IT sector makes up about 5% of the country’s GDP.  While Belarus develops some software on its own, such as the well-known electronic game World of Tanks and the Viber Messenger, the country primarily serves as an outsourcing center producing software for foreign companies.  (Olga Korelina, IT Hong Kong for the Slavic World, MEDUZA.IO (Dec. 23, 2017) (in Russian).)

News agencies report that the Decree was issued after nine months of intensive consultation between the Administration of the President and leading Belarusian businessmen, who say that this Decree is revolutionary because it supports the most radical ideas introduced by the IT industry and makes Belarus a leader in the field of blockchain technology.  (Lukashenko Signs Decree on Digital Economy and Legalized Mining of Cybercurrencies, NEWSRU.COM (Dec. 22, 2017) (in Russian).)  This move makes Belarus a regional leader in the field of cybercurrency deregulation.  A bill on Bitcoin regulation is under consideration in the Ukrainian legislature, and it is expected that some cryptocurrency regulations may be adopted by the spring of 2018 in Russia, where President Putin has said that “cybercurrencies create swindlers and terrorists.”  (Putin Is Against Cryptocurrencies, NEWSRU.COM (Dec. 7, 2017) (in Russian); Belarus Legalizes Bitcoin, LENTA.RU (Dec. 22, 2017) (in Russian).)