Russia introduces first law regulating digital rights
The law ‘On Attracting Investments Using Investment Platforms and Amending Certain Laws of the Russian Federation’, developed with the involvement of the Bank of Russia, will create legal mechanisms that will regulate the agreements that are reached in a wide range of instances where various investors use an IT system to finance investment projects.
In addition to the customary methods of attracting investments (loans and equity or debt securities placement), the law also makes provision for attracting investments by offering utilitarian digital rights. Utilitarian digital rights are the legal claim to the transfer of items or intellectual rights that are created and circulated in the IT system, or the legal claim to the execution of work or the provision of services. In connection with the adoption of amendments to the Civil Code of the Russian Federation that determined the legal basis for the advent and circulation of digital rights, the provisions of the law have been brought into line with the new regulation of the Civil Code of the Russian Federation.
When elaborating the law, the provision was also made for custodial accounts for utilitarian digital rights and securitisation i.e. the issue and circulation of securities covering utilitarian digital rights. This will make it possible to use the existing trading and clearing and settlement infrastructure to trade utilitarian digital rights without the need to adopt new regulation.
The law also simplifies the procedure for issuing such securities in order to attract investments by placing issue-grade securities using the investment platform.
In addition, the law sets out the procedure for concluding agreements between investors and parties attracting investments using the investment platform; the procedure for the flow of funds from investors to the parties attracting investments; the rights and obligations of the operator of the investment platform regarding investors’ funds in nominal accounts; and the procedure for disclosing and providing information, etc.
The Bank of Russia highlights that the adoption of this law is an important step towards creating steady business lift in finding sources of financing for small and medium enterprises in their early stages, which will foster the development of the entire range of alternative banking methods that can be used to attract financing to this market segment.