Belarus has legalized cryptocurrency transactions in an attempt to boost private sector growth and foreign investment.
According to Reuters, on Thursday (Dec. 21) Belarus President Alexander Lukashenko has signed the Decree “On Digital Economy Development” that legalizes ICO, cryptocurrencies and smart contracts. Adoption of the Decree makes Belarus the first world’s jurisdiction with the overall legal regulation of businesses based on blockchain technology.
“Having adopted the Decree, Belarus becomes one of the world’s most comfortable jurisdictions for IT business. Besides, the country is creating favorable conditions for the development of blockchain technology and businesses based on it,” said Vsevolod Yanchevsky, Director of Belarus Hi-Tech Park.
While Bitcoin plummeted to below $11,000 last week, its supporters dismiss warnings over volatility.
“All smart and intelligent people know what stability and order are,” Lukashenko was quoted as saying earlier this month. “They’re all trying to reach that shore. We’re prepared to arrange a dock and even a harbor.”
A former Soviet republic located between Russia and the European Union, Belarus has struggled to become independent of Russian money and subsidies. With that in mind, Lukashenko has introduced reforms to attract new businesses and bolster the economy after recession in 2015 and 2016.
This latest decree is designed to attract digital coin entrepreneurs who are moving their businesses to locations more welcoming to cryptocurrencies. It legalizes initial coin offerings and transactions in cryptocurrencies, including their exchange for traditional currencies on Belarusian exchanges. All trades will be tax-free for the next five years.
It also allows local IT companies to operate in part under English law, a bonus to potential foreign investors.
“The decree is a breakthrough for Belarus,” Anton Myakishev, the head of Microsoft’s Belarus office, told Reuters. “It gives the industry the possibility to make a leap forward in its development and allows foreign capital the possibility to come to Belarus and work in comfortable conditions.”
The Decree does not include any restrictions or special requirements for the creation, issue, storage, sale or exchange of digital tokens, as well as operation of cryptocurrency exchanges and platforms. Individuals are exempt from personal income tax on the incomes from mining, acquisition and sale of digital tokens; digital tokens shall not be declared. Activities related to mining, creation, acquisition and sale of digital tokens will remain tax-free until 2023.
To protect the rights of ICO participants, the Decree provides that a legal entity that creates and issues a digital token through a resident-company of the Hi-Tech Park shall meet the requirements for the holder of the digital token agreed during its creation and issue.
Denial of claims of a token holder on the grounds of lack of judicial grounds for obligation or its invalidity is not allowed.
By introducing smart contract into jurisdiction and giving companies the right to use it in transactions, Belarus has become the first country in the world to legalize smart contracts at the country level.
“Smart contract may solve the fundamental problem of all humanity which is a failure to fulfill what has been agreed on paper. A computer program takes the function of a contract’s automatic fulfillment,” said Denis Aleinikov, Senior partner at the law firm Aleinikov & Partners, one of the main developers of the Decree.
Belarus Hi-Tech Park (HTP) is named the main ground for pilot experiments with digital tokens operations. Created in 2005 at the initiative of the President of Belarus, the Park has grown to one of the leading IT-clusters in Eastern Europe and CIS.
In addition to the significant expansion of the types of activities that HTP resident-companies can perform, the Decree introduces a number of English law instruments, namely, convertible loan, option and option agreement, non-competition, non-solicitation, indemnities.
Noncitizens who have work contracts with HTP resident-companies are granted visa-free stay in Belarus for up to 180 days per year.
The Decree also prolongs tax benefits for HTP resident-companies till 2049.
Residents of Belarus Hi-Tech Park are exempt from all corporate taxes (VAT, profit tax) and other taxes (offshore duty). Employees of Belarus Hi-Tech Park resident-companies pay 9% of personal income tax instead of 13%. HTP resident-companies enjoy all the advantages of the special tax regime, regardless of the location of their Belarusian office. According to Gartner experts, Belarus is the leader in the state support of the IT industry in EMEA.