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Belarus was the first Eastern European country to adopt comprehensive legislation governing cryptocurrencies. The Presidential Decree on the Development of the Digital Economy, effective in March 2018, provides the legal framework for cryptocurrencies and blockchain technologies. Cryptocurrency operations are limited to the residents of High-Tech Park—an entity created by the Presidential Decree to serve as project incubator and host.

In November 2018, High-Tech Park issued five additional regulations pertaining to initial coin offerings, cryptocurrency platforms, and exchange operators. The regulations also provide for compliance procedures with anti-money laundering and counter-financing of terrorism legislation.  

I. Financial Regulation and Consumer Protection

Belarus was the first Eastern European country to adopt comprehensive legislation governing cryptocurrencies. The Presidential Decree on the Development of the Digital Economy, which became effective on March 28, 2018, provided the foundation for cryptocurrency and blockchain technology regulation. The aim of the Decree was to create a legal framework for the comprehensive regulation of businesses based on blockchain technology, including for regulating the issuance of and transactions with cryptocurrencies and tokens.[1] The Decree created the High Technologies Park (High-Tech Park, HTP)—a project incubator entity authorized to register and regulate entities (both residents and non-residents) engaged in the development of blockchain technologies and transactions with cryptocurrencies.

The Decree defined cryptocurrencies as a bitcoin or other digital signs (tokens) that is used in international circulation as a universal means of exchange.[2] The Decree also defined “cryptoplatform operators,” “cryptocurrency exchange office operators,” and initial coin offering (ICO) entities based on their activities in the area of blockchain and cryptocurrencies. 

In November 2018, the HTP issued the following five regulations related to cryptocurrency and token activities:

• Regulations on the Requirements to be Met by Certain Applicants for Their Registration as Residents of the High Technologies Park[3]
• Regulations on the Activity of a Cryptoplatform Operator[4]
• Regulations on the Activity of a Cryptocurrency Exchange Office Operator[5]
• Regulations on Provision of Services Related to the Creation and Placement of Digital Tokens (Tokens) and Carrying Out of Operations on the Creation and Placement of Own Digital Tokens (Tokens) (ICO Regulations)[6]
• Regulations on the Requirements for the Internal Control Rules of Residents of the High Technologies Park (Internal Control Regulations.[7]

In addition to containing more detailed definitions of the roles and authorities of various cryptocurrency entities, the regulations also introduced detailed and comprehensive requirements related to risk management, data protection, and anti-money laundering and countering-financing of terrorism (AML/CFT) procedures.

A. ICO Organizers

According to the ICO Regulations, an ICO organizer (which must be an HTP resident) must create and place tokens based on a client’s request. The creation and issuance of a particular type of token must be based on the analysis of smart contracts. The organizer can also be engaged in consulting and promotional activities with regard to tokens.[8]  

The ICO organizer is required to provide for the proper identification and vetting of clients, including identification of the first owner or owners of the tokens. It is the responsibility of the ICO organizer to vet potential clients in order to identify and manage risks based on the following categories:

• Credit risk;
• Country risk;
• Market risk;
• Liquidity risk;
• Operational risk; and
• Reputational risk.[9]

In addition, ICO organizers must comply with documentation, audit, accounting, and personnel requirements of the cryptocurrency regulations listed above.[10]

The ICO organizer is required to make audio or video recordings of negotiations with clients (with mandatory prior notification about this) and keep the data as well as all correspondence with clients for at least five years. Belarusian and foreign legal entities are allowed to be ICO customers. ICO customers must meet the following requirements: the presence of key personnel and good business standing of the customer, his founders, director, and other key professional staff members.[11]

B. Cryptoplatform Operators

According to the Regulations on the Activity of a Cryptoplatform Operator, a cryptoplatform operator (which must be an HTP resident) is an entity engaged in facilitating trading in tokens, including transactions placing the tokens on behalf of clients.[12] The Regulations also allow cryptoplatform operators to engage in transactions with tokens in the clients’ interests on the basis of an agency relationship. In order to execute these functions, cryptoplatform operators must adopt “local acts,” which are procedural guidelines for clients with a description of the procedures and processes for accepting clients.[13]

Cryptoplatform operators must adopt measures to limit suspicious transactions, especially with regard to anonymous tokens.[14] They must also provide for the complete separation of their own money and the money and tokens of clients; report on the balances of electronic money and tokens of each client; and report on the execution (or non-execution) of orders.[15]  Furthermore, they must have in place due diligence and proper control measures in preventing trading involving minors, citizens of countries that prohibit dealings with cryptocurrency and tokens, and citizens of Belarus who lack proper knowledge of cryptocurrencies.[16] The Regulations also prescribe general rules for fair and transparent advertising, which must inform clients of the potential risks in dealing with cryptocurrencies.[17]

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II. Anti-Money Laundering Law

The Internal Control Regulations prescribe requirements and procedures for vetting, verifying, and managing risks associated with activities governed by AML/CFT legislation.[18] In particular, the Regulations state that internal control rules must be in compliance with part 3 of article 5 of the AML/CFT Law, as well as other legislative and regulatory acts.[19] The main principle of AML/CFT legislation--know your client--must be complied with. HTP residents have the right to refuse to execute financial transactions on behalf of a client if the latter proposes or intends to execute anonymous financial transactions.

HTP residents also have the right to refuse to executive financial transactions exceeding 2000 base values if the client proposes or intends to use mechanism other than bank or electronic money transfers. In this case, the HTP resident must, within one business day, inform financial intelligence bodies about such a refusal.

A. Data Collection and Protection

HTP residents are required keep information about relevant transactions for five years beginning from the date of the client’s request for the execution of such transactions. Such information includes verification of the addresses (identifiers) of virtual wallets with a high degree risk score from a money laundering perspective.[20]

B. Internal Control

According to the Internal Control Regulations, an HTP resident’s internal control system must include

identification and verification of all clients executing financial transactions, and in the cases specified by these Regulations and (or) the internal control rules, and also of the clients executing other transactions (operations) with tokens, which are not financial operations;

storage of the information which includes clients’ identification data (including the information obtained following the results of verification, information updating);

determination of the nature of the client’s ordinary activity; and

monitoring of all financial transactions of the clients . . .  [21]

C. Risk Management Measures

The Regulations prescribe that the following areas of risk exposure should be considered by HTP residents:

• The client’s profile risk;
• The geographic or regional risk;
• The transactional risk.[22]

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III. Taxation

According to the Presidential Decree, the income of HTP residents as well as the income of natural persons incurred during the mining, creation, acquisition, or alienation of tokens is exempt from income tax.[23] The sale of tokens is also exempt from value-added tax.[24] These exemptions will be in effect until January 1, 2023.[25]

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Prepared by Astghik Grigoryan
Legal Research Analyst
April 2019

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Last Updated: 12/30/2020