According to Part 3.1 of Article 5 of Federal Law No. 259-FZ dated July 31, 2020, “On Digital Financial Assets, Digital Currency, and Amending Certain Legislative Acts of the Russian Federation,” foreign digital rights (“FDRs”) must be qualified as digital rights in order to be admitted for circulation in Russian information systems.
Instruction 7036-U establishes the following requirements for such qualification of FDRs:
FDRs must be issued based on a document outlining the procedure for issuance and/or circulation, disclosing information about the issuer, the issuance procedure, the scope of rights, as well as the procedure for fulfilling and securing obligations under the FDRs.
FDRs must not be linked to foreign entities – residents of unfriendly states and/or territories – according to the list approved by Decree No. 430-r of the Government of the Russian Federation dated March 5, 2022 (“unfriendly entities”):
Unfriendly entities cannot act as issuers of FDRs;
FDRs must not certify rights in relation to securities of unfriendly entities;
An unfriendly entity cannot be an obligated party under the FDRs;
Payments under the FDRs must not be made through unfriendly entities;
The place of fulfillment of obligations must not be limited to the territory of unfriendly states and/or territories;
Disputes regarding FDRs cannot be considered in state or arbitral courts of unfriendly states and/or territories.
FDRs must not certify the right to demand the transfer of digital currency or FDRs that are not admitted for circulation in Russia.
By establishing these requirements, the Bank of Russia protects the Russian market from financial instruments:
with opaque issuance terms;
linked to unfriendly entities;
linked to assets not admitted for circulation in the Russian Federation.
The assessment of FDRs’ compliance with the above requirements is the responsibility of the operator of the information system to which they are planned to be admitted.