Russian Courts Can't Agree on Whether Crypto Is Property

Russian courts are making conflicting rulings on whether bitcoin and other cryptocurrencies count as property.

In one new case, Saint Petersburg's district court has refused to force bogus law enforcement officers to return cryptocurrencies extorted from a victim on the basis that digital assets are not legitimate assets.

According to the press office Telegram channel for the Saint Petersburg courts, the district court convicted two men for extorting money from an unnamed cryptocurrency over-the-counter trader on June 30.

The criminals had pretended to be officers of Russia’s law enforcement and counter-terrorism agency, the Federal Security Service (FSB) – the successor of the KGB.

Threatening to beat and torture the victim as well as claiming they'd opened a felony case against him, Petr Piron and Eugeny Prigozhin forced the victim to pay them 5 million rubles (over $70,000) in cash and transfer 99.7035 in bitcoin and some DigiByte and BitShares tokens to their digital wallets. The bitcoin alone is worth over $900,000 at current prices.

According to the court press release, the victim has been handed back the cash that was stolen. However, the court did not rule the cryptocurrencies should also be transferred back. The court's website confirms the convictions, although it does not provide the text of the ruling.

The press release, however, points out that under the Russian Civil Code cryptocurrencies have no legal status and therefore cannot be deemed property for the purpose of a criminal case.

Plain wrong?

The decision is nothing more than a mistake, believes Mikhail Uspenskiy, crypto-savvy lawyer and deputy head of the Chamber of Tax Consultants in Russia. “The stance that cryptocurrency is some kind of a dummy and has no legal significance is deeply flawed and erroneous,” Uspenskiy told CoinDesk.

He pointed out the Russian courts have previously recognized crypto as a form of property. Uspenskiy cited the case of Ilya Tsarkov, who filed for bankruptcy in 2017 and was forced to reveal his crypto holdings so they could be included in his estate for bankruptcy proceedings.

There have also been criminal cases in which the courts treated crypto assets like a form of property, such as when bitcoin was extorted during blackmail or fake banknotes exchanged for crypto, Uspenskiy said.

And in another case, after a Russian court refused to recognize crypto losses claimed by ICO investors who used an online investment platform called ICOadm.in, a Moscow appeals court backed the original ruling, but did define cryptocurrency as "other kind of property."

The appeals court further said that, under Russian law, crypto is not defined either as property, an asset, a money surrogate or information.

That may soon change. In June, a package of draft bills was introduced in the country’s parliament, the State Duma, suggesting that cryptocurrencies should be treated as property. The bills would also, however, prohibit any operations with crypto using Russia-based infrastructure.

The initiative has been criticized by Russia’s Mininstry of Economic Development and Ministry of Justice, as well as by the crypto community advocates in the country.