Leningrad Oblast in Western Russia, a region that has significant borders with EU nations, has asked the Russian Federal Bank to legalise the use of Bitcoin. The request has been made to specifically permit the use of Bitcoin in trading with Estonia and Finland. The oblast is bordered by Finland to the northwest and Estonia to the west, as well as five federal subjects of Russia: the Republic of Karelia in the northeast, Volgoda Oblast in the east, Novgorod Oblast in the south, Pskov Oblast in the southwest, and the federal city of Saint Petersburg in the west.
Leningrad Oblast was established on August 1, 1927, although it was not until 1946 that the oblast’s borders had been mostly settled in their present position. The oblast was named after the city of Leningrad (now St.Petersburg). Unlike the city, the oblast retains the name of Leningrad.
It is understood that unofficial trade in Bitcoin between Leningrad Oblast and Estonia has already reached some €50 million. The three primary movers behind the Russian request are Vladimir Petrov, the Deputy in the regions Legislative Assembly, Viktor Karpenko, the Mayor of Ivangorod, and Marina Chistova, head of the Slantsy district. The trio formally requested for the Bank of Russia to “Legalize the circulation and exchange of cryptocurrencies in the border areas of the Leningrad region.” last week, according to the local newspaper Vesti
Three border districts were named in particular; Kingiseppsky, Slantsevsky, and Vyborgsky. Within the region, the Kingiseppsky and Slantsevsky districts border Estonia whereas Vyborgsky borders Finland. Their administrative centers are the towns of Kingisepp, Slantsy, and Vyborg respectively, while Leningrad Oblast is well connected to Estonia and Finland by Road, Rail and Sea. It can accurately described as part of China’s One Belt One Road initiative and is a major thoroughfare from China and Asia, across Russia and into the EU.
Related: Russia Agrees Significant Silk Road Projects With China
Petrov was on record as saying “The measures will increase the attractiveness of Kingiseppsky and Slantsevsky districts to neighboring Estonia, and Vyborgsky district which is located near the border with Finland.” Petrov explained that the Leningrad region borders multiple European Union countries, where bitcoin adoption is much further ahead than in Russia and is actively used in both Estonia and Finland. However, transit passengers from border countries arriving in Russia may not have the correct currency to spend, and Russian ATMs do not provide access to large sums of cash. Allowing cryptocurrency payment in border areas “could help boost the number of visitors, both from the European and Russian side,” he said. Estonian and Finnish businessmen and foreigners transiting through these countries to Russia would be able to stay in the border areas, eat and fill their vehicles with fuel. The plan would be to establish cryptocurrency exchange points on the border areas with Estonia and Finland and open special shops and cafes where visitors can pay by bitcoin.
The Russian ombudsman for business rights, Dmitry Marinichev, supports the idea of politicians lobbying for the use of cryptocurrencies in the Leningrad region. “In general, I support the idea of people using cryptocurrencies. Even though the proposal is of a populist nature, I support it because so many people are beginning to understand how it functions, and as it offers a variety of new technological innovations in their lives.”
Russia currently bans Bitcoin from use and has security concerns such as money laundering and the financing of terrorism. It has also been pondering the launch of its own Cryptocurrency.
Consequently, there are complex legal and legislative issues to overcome. However, Russia has been examining Japan’s experience in cryptocurrency regulation and should the Russian Federal Bank be minded to offer Leningrad Oblast the ability to set up a limited pilot scheme for six-twelve months as a test case, it can be expected to follow the Japanese model. Russia can also follow the example of China, which also allows trade in Bitcoin. Customers can exchange RMB at various Bitcoin dealerships in the PRC and obtain Bitcoin credits. Looking further ahead, I recently posed the question “Which currency will be used along the Silk Road?“. Should the Russian Federal Bank decide to give Bitcoin a trial in Leningrad Oblast’s border regions with Estonia and Finland, the implications for not just Russian-EU trade, but for the entire OBOR routes could be highly significant.
Chris Devonshire-Ellis is the Founding Partner and Chairman of Dezan Shira & Associates. He is based in Europe. The firm provides European businesses and governments with strategic, legal, tax and operational advisory services to SMEs and MNCs investing throughout Eurasia and has 28 offices across China, India and the ASEAN nations as well as St. Petersburg and Moscow. Please contact the firm at email@example.com or visit the practice at www.dezshira.com
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In this issue of Russia Briefing, we explain the basics of business set up for foreign investors, from trademark registration, representation, trading mechanisms, and manufacturing. With low corporate tax rates, Russia is set to become the most dynamic of the trade corridors opening up to Asia.
Dezan Shira & Associates´ Russian investment brochure offers an overview of the services provided by the firm – both foreign investment into Russia and Russian investment into Asia. It is Dezan Shira´s mission to guide investors through Russia´s complex regulatory environment and assist with all aspects of establishing, maintaining and growing business operations in the region.
As predicted, a significant array of economic cooperation agreements were signed between Russia and China during President Xi Jinping’s recent visit to Moscow.
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Other deals include commitments from China Development Bank, China National Petroleum Corporation, the Silk Road Fund, China Investment Corporation, the Russian Direct Investment Fund, and from the Russia-China Investment Fund. These are examined as follows:
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In this issue:
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- Setting up a Limited Liability Foreign Owned Company in Russia
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At the recent St. Petersburg International Investment Forum, the number of delegates and deals signed hit record highs, showing that Russia’s decision to look East has been entirely justified. The waves of investment coming from China – which is seeking to secure long-term energy, commodities, agriculture, and trade routes to keep its economy on track – are having a highly positive knock-on effect on Russia. Russia also hosts the 2018 FIFA World Cup next year – this new edition of Russia Briefing is a timely one as investors scramble to get into a country that is benefiting from both China’s own One Belt, One Road (OBOR) ambitions and the World Cup.
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Konstantin Voronov, director of European Political Studies at the Russian Institute of World Economy and International Relations, has said that there are several layers to the EU’s latest sanctions. “I think this is a sort of ‘layer cake.’ Firstly, there is certainly a large ideological component in the foreign policy course of our European neighbors and partners. Continue reading…
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