Digital Financial Assets: Segments and Prospects of Legal Regulation in the Brics Countries

• Author: I. Sarnakov
• Position: Financial University under the Government of the Russian Federation (Moscow, Russia)
• Pages: 95-113

BRICS LAW JOURNAL Volume VI (2019) Issue 4

DIGITAL FInAnCIAL ASSETS: SEGMEnTS AnD PRoSPECTS

oF LEGAL REGuLATIon In THE BRICS CounTRIES

IGOR SARNAKOV,

Financial University under the Government of the Russian Federation

(Moscow, Russia)

https://doi.org/10.21684/2412-2343-2019-6-4-95-113

In the environment of the current trend towards digitalization of the world economy,

the issue of the legal regulation of the institute of digital nancial assets as well as the

activity relating to the generation of these assets is of considerable interest. As practice

shows, individual countries face the situation where these assets are already turning

over, but there is still no legal regulation. This state of aairs may give rise to cases of

illegal turnover of nancial assets and fraud in this sphere. Presently, the geopolitical

map on digitalization of the economy is fragmented. Some countries have recognized

and legalized the turnover of digital nancial assets, others have so far not adopted an

unambiguous attitude with respect to this new institute, while a third group of countries

has not even recognized their legal nature nor their very existence. This ambiguity raises

many issues relating to the legitimacy of digital nancial assets and the feasibility of

the introduction of this new nancial product. The article analyzes the state of the legal

regulation of the institute of digital nancial assets in the BRICS countries, considers the

standpoints of legislators and scientists on the legal nature of these nancial assets.

Keywords: digital financial assets; cryptocurrency; token; mining; smart contract;

blockchain.

Recommended citation: Igor Sarnakov, Digital Financial Assets: Segments and

Prospects of Legal Regulation in the BRICS Countries, 6(4) BRICS Law Journal 95–113

(2019).

BRICS LAW JOURNAL Volume VI (2019) Issue 4 96

Table of Contents

Introduction

1. Digital Financial Assets in Brazil

2. Digital Financial Assets in Russia

3. Digital Financial Assets in India

4. Digital Financial Assets in China

5. Digital Financial Assets in the Republic of South Africa

Conclusion

Introduction

Recent global changes in the eld of nancial technologies and operations

have raised a number of important issues for the legislator in Russia and abroad,

including not only the need to determine the legal status of digital nancial assets

and the limits of their legal regulation, but also the possibility of their creation and

use. Development of the digital economy at the state level is associated with the

resolution of a number of fundamental issues in legal science in order to form a new

regulatory legal environment.

Settlement of these issues will aect many spheres of legal regulation in modern

society and the state, so it is important to choose the right vector of development,

for which purpose it seems necessary to analyze foreign experience.

Earlier studies by individual authors addressed some of the aspects related to

digital nancial assets. Thus, the time of the emergence of cryptocurrency and the

terms to be used were established. The past ten years have seen the creation of

a new class of digital instruments that are not issued by a sovereign institution or

commercial bank, are not denominated in a sovereign unit and do not have physical

counterparts. Since these instruments may be used as a currency, they are variously

labeled “electronic cash,” “digital currency,” “virtual currency” or “cryptocurrency.”

Additionally, the conclusion was reached that it is necessary to determine the

essence and nature of cr yptocurrencies as well as their legal status and functions,

alongside cash and e-money.1 The term “cryptocurrency” originally was used by the

Bitcoin system introduced in 2009. Cryptocurrency is a type of digital currency whose

operations are based on the methods of cryptography. The word “crypto” comes from

Greek, meaning “hidden” or “private.” Cryptocurrency, then, means money that is

made hidden and private – and therefore secure – by means of encryption, or coding.

The experience of the BRICS and European Union countries in their regulation was

1 Irina Cvetkova, Cryptocurrencies Legal Regulation, 5(2) BRICS Law Journal 128, 152 (2018).