Russia is actively working on legalizing and regulating decentralized financial organizations, known as DAOs, to bring more liquidity to the local Digital Financial Assets (DFA) market.
Ivan Chebeskov, the Director of the Department of Financial Policy at the Ministry of Finance, discussed this at the Crypto Summit 2023.
Russia’s Efforts to Legalize DeFi DAOs
Amidst the impact of international sanctions imposed on Russia, the country is focusing on legalizing a new form of decentralized finance called DAO. The goal is to inject excitement into the markets while adhering to the principles of decentralization.
A DeFi DAO is a Decentralized Autonomous Organization that utilizes blockchain technology and smart contracts to manage various financial transactions in a decentralized manner. DeFi DAOs will bring vitality to Russian markets by facilitating popular activities such as lending, exchanging, storing digital assets, staking, and more.
The Russian government’s move is seen as a way to increase market liquidity in light of recent sanctions. Chebeskov stated at the summit:
“We actively support the development of DFAs, but we understand that DFAs alone will not thrive. We need a connection between DFAs and the decentralized world of finance to utilize the existing liquidity in decentralized finance.”
Since the DFAs bill was signed into law by Russian President Vladimir Putin in 2020, the country has faced challenges in attracting investors. Chebeskov further highlights that currently, only 10 platforms have been registered through the Bank of Russia.
There is optimism that the DFA market will gain momentum, and the potential legalization of DeFi DAOs could expedite the process.
Therefore, Chebeskov emphasized that Russia recognizes the need to legalize the DAO in order for both DFAs and decentralized finance to develop more actively. He also mentioned that unlike other countries where new definitions are required for DAO legalization, Russia does not have such a need. He hopes that the DAOs will perform well following legalization.
Russia’s Innovative Approach to Sanction Evasion
Since the start of the chaotic Russian invasion of Ukraine, the country has faced sanctions from several major economies, primarily led by the US. Despite the challenges, Russia and its investors have been resourceful in evading these sanctions.
Last year, there were reports of local investors using cryptocurrency to bypass sanctions. Furthermore, in 2022, rumors circulated about Russia considering the legalization of crypto specifically for international trade.