In the previous article, we examined issues related to cryptocurrency inheritance by will.
In this article, we will look at what you should not do in order not to lose money when using cryptocurrency, based on the practice of Belarusian courts.
For more details, read Matvey Haradnik’s article for the leading financial portal MYFIN.BY or the text below.
1. General approaches of the courts to cryptocurrency
1.1. Legal nature of cryptocurrency
Belarusian courts, relying on Presidential Decree of the Republic of Belarus of December 21, 2017 No. 8 “On the Development of the Digital Economy” (hereinafter – Decree No. 8) and other legal acts in this field, consider cryptocurrency as a digital sign (token) – an object of civil rights that is tradable within the established legal regime.
Cryptocurrency is not recognized as legal tender; however, it can be acquired and disposed of, including by purchase and sale, if such an operation is carried out in accordance with the requirements of the law.
1.2. Restrictions on circulation
The courts note that transactions with cryptocurrency carried out bypassing the High Technology Park (hereinafter – HTP) or in violation of the established procedure are not protected by the courts. This applies, for example, to unauthorized P2P deals or transfers between private individuals without the involvement of an HTP resident.
Thus, at the current moment, the key point in court practice is the application of restrictions on the circulation of cryptocurrency on the territory of Belarus.
2. Typical categories of cases
2.1. Bringing to administrative liability for illegal cryptocurrency transactions
Permitted operations with digital signs (tokens) must be carried out in accordance with the requirements of Decree No. 8 and Presidential Edict of the Republic of Belarus of 17.09.2024 No. 367 “On the Circulation of Digital Signs (Tokens).”
Cryptocurrency under Belarusian law is a type of digital sign (token), therefore everything that concerns tokens also applies to cryptocurrency.
Economic courts consider cases of administrative offences under Part 3 of Article 13.3 of the Administrative Offences Code (illegal entrepreneurial activity).
Case
A frequent scenario in this context is a situation where, on the territory of the Republic of Belarus, an individual assists another person in carrying out transactions (operations) with tokens by acting as a party to such transactions.
For example, after receiving cash or a transfer to a bank card from an unidentified person, such an individual purchases cryptocurrency on a crypto exchange. In practice, there are cases involving both Belarusian exchanges (HTP residents) and foreign ones.
The purchased cryptocurrency is then transferred to a wallet specified by the same person on that person’s instructions, for which the individual receives monetary remuneration.
According to Decree No. 8, entrepreneurial activity consisting of assisting other persons in carrying out operations with tokens is illegal and prohibited. One form of such assistance is the performance of actions aimed at purchasing cryptocurrency in the interests of or on behalf of third parties, including at the expense of funds provided in advance by such parties.
Risks and liability
Since the individual assists another person with cryptocurrency operations, carries out transactions on a systematic basis, and receives income from this, the court recognizes such activity as entrepreneurial and prohibited, which entails administrative liability under Part 3 of Article 13.3 of the Administrative Offences Code.
In this situation, up to 100% of the amount of income may also be confiscated (not profit, but exactly income, i.e., the entire amount of proceeds without taking into account the expenses incurred to obtain it).
At the same time, under tax legislation, this gives rise to tax obligations for such an individual (without sole proprietor status). For tax purposes, the disposal of tokens, including by exchanging them for other tokens, is treated as the realization of property rights. In this situation, the personal income tax base is determined as the monetary value of such income, without considering expenses.
Thus, illegal cryptocurrency operations are fraught not only with an administrative fine, but also with recovery of the entire amount of revenue without deducting costs, as well as tax consequences.
2.2. Bringing to criminal liability for theft of cryptocurrency
There is case law concerning a criminal case against a citizen accused of committing a crime under Article 212 of the Criminal Code (theft of property by modifying computer information).
Case
While visiting the victim, the citizen repeatedly used the victim’s laptop. Without the owner’s consent or permission, using a code saved in the laptop’s memory, the accused gained automatic access to the victim’s cryptocurrency wallets.
He logged in as the lawful owner on a platform that allows cryptocurrency management and entered knowingly false computer information into the system about transactions allegedly made by the victim. In this way, the accused made three transfers of tokens from the victim’s wallet to his own wallet.
Risks and liability
As a result, the accused was found guilty of theft of property by modifying computer information committed on a particularly large scale under Part 4 of Article 212 of the Criminal Code.
It should be noted that due to blockchain anonymity and the irreversibility of transactions, satisfying claims for the return of stolen cryptocurrency is often impossible if no evidence is provided of the attacker’s identity or the possibility of identifying the asset. Mere loss of access to a wallet is not grounds for compensation of damages without establishing the culpable person.
2.3. Termination of sale and purchase contracts for property acquired for cryptocurrency
As is known, cryptocurrency is not recognized as legal tender. Therefore, sale and purchase contracts for property which use cryptocurrency as a means of payment in Belarus clearly do not comply with the law.
Case
Individuals concluded a sale and purchase contract for a car. Before signing the contract, the buyer transferred tokens for the car to the seller’s electronic wallet. After signing the contract, the seller handed over the car to the buyer along with documents and keys. No cash was handed over for the car.
After the seller found out that the tokens were a financial pyramid and fraudulent scheme, he proposed that the buyer terminate the contract voluntarily, but the buyer refused. Referring to the fact that the contract was concluded with substantial violations and payment under it has not been made to this day, the seller asked the court to terminate the sale and purchase contract and oblige the buyer to return the car received under the contract along with its technical documentation and sets of keys.
Legal consequences
Following consideration of the case, the court concluded that the claims were justified and should be satisfied, since tokens are not a means of payment in the Republic of Belarus.
3. Enforcement against cryptocurrency
In Belarus, the Ministry of Justice has established rules for enforcing judgments against cryptocurrency.
If the debtor owns cryptocurrency, the bailiff issues a ruling to seize the cryptocurrency and, if necessary, transfers it to a separate virtual wallet.
The transfer of cryptocurrency for sale is carried out without determining its value. The sale of cryptocurrency is carried out through an appropriate HTP resident. The value of the sold cryptocurrency is the actual amount of money credited to the account of the enforcement authority.
4. Practical conclusions for market participants
All cryptocurrency transactions should be carried out through HTP residents in order to obtain judicial protection. P2P transactions or transfers between private individuals without the participation of an HTP resident are prohibited; in this case, administrative (and even criminal) liability is possible, as well as confiscation of up to 100% of the income amount and tax consequences.
Cryptocurrency cannot be used as a means of payment, nor can purchase and sale agreements for property be concluded in cryptocurrency. The risks include termination of the contract and return of the property or goods.
To prove rights to an asset, it is important to keep transaction hashes, correspondence, and exchange reports. Simple assertions about the existence of a crypto asset are not accepted without digital traces.
What is the bottom line?
Belarusian case law on cryptocurrency is still taking shape and remains limited in the number of cases, but key trends are already emerging.
Courts recognize cryptocurrency as an object of civil rights, but protect the interests of the parties only within the framework of legal transactions conducted through HTP residents.
The main body of court cases concerns bringing individuals to administrative liability for illegal cryptocurrency transactions.
In the future, an expansion of judicial practice can be expected, including issues of levying execution on a debtor’s cryptocurrency. The presence of cases confirmed by court practice will undoubtedly strengthen market participants’ certainty regarding broader use of cryptocurrency and instruments based on it (tokenized bonds, ICOs, NFTs) in practice.
