USSR’s crypto paradise: $1B ICO of Abkhazia, Belarus legalizes ICOs and cryptocurrencies
Two months ago The Republic of Abkhazia announced it’s plans to raise $1 billion dollars in an ICO. (Abkhazia isn’t recognized by NATO or the international community is because it succeeded from Georgia in 1991, not to the approval of Georgia or Georgia’s now NATO allies. The only countries that recognize Abkhazia are Russia and 3 other nations.)
Abhkazian government officials stated that they will soon begin the sale of Abhkazian Republic Coins (ARC) which will be limited to 8 billion coins which will be open to international investment and will begin transitioning the entire nation to begin the use of ARC as their only legal currency within Abhkazia. To incentivize their own citizens to adopt the currency, the Abhkazian government has intentions to waive a range of taxes with the utilization of ARC during the first 3 years after it’s launch. Abhkazian Republic Coins are set to be launched some in the later part of this year, and pushing for the adoption into its economy by 2018. The full intent is for Abhkazia to completely abandon any other form of currency use within Abhkazia except for the use of ARC.
Abkhazia coin might be the Pets.com of ICOs being peddled by blockchain enthusiasts who have the ears of high-level politicians. Abkhazia was the second country to consider crypto as a funding mechanism. Venezuela was the first, with its well-publicized plan to roll out an oil-backed token called the ‘petro’.
Consulting firm Blockchain Consultants Ltd. says it is working with the Abkhazia government on the benefits of doing an ICO. They recently put a 28-page powerpoint presentation together to test the waters. And they hope to create what their blockchain consultants are calling a “crypto paradise.” Given the fact that bitcoin became a bonafide futures market, and that literally hundreds of start-ups are raising millions in a matter of weeks in currencies that do not exist, then why not raise a few million in a country that, according to the U.N., does not exist either? Most startups will not get a dime from venture capital, so the ICO market has opened a door for them and made hundreds of founders millionaires in the last year. Countries like this could very well see themselves as a “startup”. No one knows them. What people do know is mysterious, sometimes bad.
Abkhazia leaders might think it has a nice enough landscape that can attract Russian and eastern European blockchain aficionados to build the “crypto-anarchist” society on the Black Sea, that investment proposal is aiming for. The entire country would be based on the blockchain. It’s a new experiment. Their consultants are hoping to raise a ridiculous sum: a cool $1 billion.
“This is a serious project which can completely change [local] industry,” conference organizer Evgeniy Galiakhmetov told the audience. “You really will be able to participate in the growth of the country. Build infrastructure projects, accept and pay for products and services with the help of cryptocurrency.” Breakaway authorities in Eastern Ukraine are similarly aiming to utilize Blockchain at government level, to circumvent both bureaucracy and international pressure.
One week ago Belarus President Alexander Lukashenko has signed the Decree “On Digital Economy Development” that legalizes ICO, cryptocurrencies and smart contracts. Adoption of the Decree makes Belarus the first world’s jurisdiction with the overall legal regulation of businesses based on blockchain technology.
The Decree does not include any restrictions or special requirements for the creation, issue, storage, sale or exchange of digital tokens, as well as operation of cryptocurrency exchanges and platforms. Individuals are exempt from personal income tax on the incomes from mining, acquisition and sale of digital tokens; digital tokens shall not be declared. Activities related to mining, creation, acquisition and sale of digital tokens will remain tax-free until 2023. To protect the rights of ICO participants, the Decree provides that a legal entity that creates and issues a digital token through a resident-company of the Hi-Tech Park shall meet the requirements for the holder of the digital token agreed during its creation and issue.
By introducing smart contract into jurisdiction and giving companies the right to use it in transactions, Belarus has become the first country in the world to legalize smart contracts at the country level. “Smart contract may solve the fundamental problem of all humanity which is a failure to fulfill what has been agreed on paper. A computer program takes the function of a contract’s automatic fulfillment,” said Denis Aleinikov, Senior partner at the law firm Aleinikov & Partners, one of the main developers of the Decree.
In addition to the significant expansion of the types of activities that HTP (Residents of Belarus Hi-Tech Park are exempt from all corporate taxes (VAT, profit tax) and other taxes (offshore duty). Employees of Belarus Hi-Tech Park resident-companies pay 9% of personal income tax instead of 13%. HTP resident-companies enjoy all the advantages of the special tax regime, regardless of the location of their Belarusian office.) resident-companies can perform, the Decree introduces a number of English law instruments, namely, convertible loan, option and option agreement, non-competition, non-solicitation, indemnities.
Noncitizens who have work contracts with HTP resident-companies are granted visa-free stay in Belarus for up to 180 days per year. The Decree also prolongs tax benefits for HTP resident-companies till 2049.
Unlike several major bitcoin markets like South Korea, the Belarus government will not tax mining, trading of cryptocurrencies, and sale of digital tokens. According to Belarus Hi-Tech Park director Vsevolod Yanchevsky, activities related to mining, creation, acquisition and sale of digital tokens will remain tax-free until 2023, throughout the next five years.
The primary motive of the government of Belarus in providing a favorable environment for both cryptocurrency businesses and investors is to better facilitate the growth of its digital economy, beginning with the fastest growing technology and financial network in bitcoin. Similar to Zug in Switzerland, better known as Crypto Valley, the Belarus government plans to address the rapidly growing demand for ICOs and token sales by establishing an ecosystem in which blockchain projects and startups can freely, without being concerned about regulatory conflicts and boundaries, issue crypto-tokens.
Currently, the global cryptocurrency market is largely dominated by four regions: the US, South Korea, Japan, and Hong Kong. The US and Japan settle more than 60 percent of the global bitcoin and cryptocurrency trades, while South Korea and Hong Kong account for more than 10 percent of the market. In the past, leading cryptocurrency markets like Australia with innovative startups and well-backed early-stage companies struggled to demonstrate success due to the inefficient and impractical policies imposed by the government. Still, the Australian bitcoin market is lagging behind other regions.
Belarus has drafted a bill that addresses high tech IT spheres including Blockchain technology, cryptocurrency and even self-driving cars, in the hope of attracting international investment in technology that were once forbidden or seen as too risky. Belarus and this draft bill hope to pull Blockchain technology and cryptocurrency into the mainstream, not only in the Eastern European country but also internationally. This will allow for big mining centers to be formed which will be highly successful due to the excess and reasonable electricity that is available through the nuclear power stations in the country.
With this draft legislation tabled, the National Bank has proudly announced that it has tested and approved the use of Blockchain technology in the banking sphere. The National Bank of Belarus is now looking at using Blockchains to as an information network within banking and non-banking processes. The central bank has created a self-regulatory mechanism for the management and development of the Belarusian Blockchain network using Council of Nodes (owners certifying nodes), whose members have equal rights. The first practical use of this Blockchain network in the sector, according to the National Bank is the ability to transfer information about bank guarantees. The next step will be the introduction of the Blockchain technology in the securities market.
