Russia is actively pursuing the legalization and regulation of decentralized financial organizations, commonly referred to as DAOs. This move aims to enhance liquidity in the local Digital Financial Assets (DFA) market and was highlighted by Ivan Chebeskov, the Director of the Department of Financial Policy at the Ministry of Finance, during the Crypto Summit 2023.
Russia’s Initiative in Legalizing DeFi DAOs
Amidst the backdrop of international sanctions imposed on Russia, the country is shifting its focus toward the legalization of DAOs, a novel form of decentralized finance. This strategic move seeks to inject vitality into the financial markets while upholding principles of decentralization.
DeFi DAOs, or Decentralized Autonomous Organizations, utilize blockchain technology and smart contracts to facilitate various financial transactions in a highly decentralized manner. The introduction of DeFi DAOs promises to invigorate the Russian financial landscape, encompassing activities such as lending, digital asset exchanges, storage, staking, and more.
The Russian government’s decision to embrace DeFi DAOs is viewed as a means to infuse additional liquidity into the market, particularly in light of recent sanctions. Chebeskov articulated this sentiment during the summit, stating,
“We actively promote the development of DFAs, but we recognize that DFAs alone will not thrive; we need a bridge between DFAs and the decentralized realm of finance to tap into the existing liquidity within decentralized finance.”
Since the enactment of the DFA bill in 2020, signed into law by President Vladimir Putin, Russia has encountered challenges in attracting investors. Chebeskov noted that, as of now, only ten platforms have been registered with the Bank of Russia.
There remains optimism that the DFA market will gain momentum, and the potential legalization of DeFi DAOs could expedite this process.
Chebeskov emphasized that Russia acknowledges the importance of legalizing DAOs “for the more active development of both DFAs and decentralized finance in general.”
Notably, unlike countries where the legalization of DAOs necessitates new definitions, Chebeskov clarified that no such requirement exists in Russia. He anticipates that following legalization, DAOs will thrive within the country.
Russia’s Innovative Response to Sanctions
In the wake of the turbulent Russian invasion of Ukraine, Russia has faced sanctions from major economies, led by the United States. Despite these challenges, Russia and its investors have demonstrated resourcefulness in circumventing sanctions.
Reports from the previous year suggested that local investors were utilizing cryptocurrencies as a means to evade sanctions. Additionally, rumors circulated in 2022 regarding Russia’s potential legalization of cryptocurrencies for international trade.
This proactive stance reflects Russia’s determination to navigate the complex landscape of international sanctions and explore innovative financial solutions.