On December 21, 2017, the President of Belarus signed a decree that purports to create a very friendly business, contract, and tax regime for crypto/blockchain startups. Like similar structures in China, there is a specific geographical area (here, “The Park of High Technologies”) with different tax and legal regimes. This decree has some notable provisions that could be very beneficial for blockchain companies, and a few things to worry about.
Status of the Law: One significant issue is the last thing mentioned in the decree: that “[t]his decree is temporary and…shall be presented for consideration of the National Assembly of Belarus.” There is a risk that the Assembly will not pass the decree into law. However, Belarus recognizes that they are at the forefront of the blockchain space, and they will likely want to stay there, so it will probably be law before long. Also, President Lukashenko has quite a bit of power in Belarus. It seems likely that if he wants this to be law, it will be law. Though that brings up another issue: if he wants it to stop being law, it will stop being law. Never fear! Even if that were the case there are a few protections built-in.
Protections: The decree, and the Digital Economy Law generally, state that English law (common law) will apply to companies that operate in The High Technology Park. Institutions are already being set up in Belarus that will act like Common Law courts and will use many standards that already exist in the international investment system. So, even if the government of Belarus were to expropriate (take over, or impose too many regulations) the investment, the decision about that expropriation and how much is owed would be made by a court, using common law principles that are familiar to international investors. Indeed, companies in the Park will be able to choose their courts and arbitrators. These adjudicators and principles are often very friendly towards companies that have had their investments taken over. Often, these are provisions granted in an investment treaty between two countries, but the Government of Belarus is building it into the law specifically to benefit individual companies and their investors. There are also a variety of specific provisions granting a lot of power for individuals/companies to contract (for example, non-compete clauses are allowed). Overall, the Belarusian desire to have investment come to their country, and the common law protections will likely make Belarus a welcoming place for blockchain innovators.
Banking: Another issue that arises is that companies that operate blockchain-based platforms or exchanges have to have up to a million Belarusian rubles in a Belarusian bank to back up their operation. (Note: 1 Belarusian ruble = .5 USD.) This might be quite the burden for some companies and may make it easier for an investment to be taken over by the government, but it does lend credibility to the whole scheme, as it wouldn’t make any sense for Belarus to welcome investors, without requiring some money in return.
Securities: The decree specifically states that securities laws, regulations, and licensing requirements do not apply to blockchain companies. However, this is limited to tokens that do not represent a company’s capital (so… stock shares). At this point, this just looks like it will operate as a very narrow interpretation of what a “security token” is. This is beneficial to many ICOs as it will be far less ambiguous that the current state of SEC crypto regulations in the U.S.
Taxes: The decree states that there will be no taxing on token proceeds until January 2023 (if there isn’t a bumper sticker with “tax-free ’til ‘23” on it, I’ll be very disappointed”). Additionally, mining is not considered an “entrepreneurial activity” and will also not be taxed “til ‘23.” This might be the primary benefit to basing a blockchain startup out of Belarus. One important note, there is a fee of 1% of revenue (with several deductions) that is paid to the Park of High Technologies. It’s not all a free ride.
Government oversight: Though the Government is, for the most part, going to let companies do as they please, companies will need to have “conferences, seminars, lectures, trainings, etc.” approved by the Administrator over The Park of High Technologies.
All in all, Belarus wants to be a tech-forward country, and they are marketing themselves as such. It is very likely that many entities from Russia and Ukraine that are facing increased regulation on blockchain enterprises will move to Belarus. It might not be a bad idea for blockchain businesses from around the world to look into having an office in The Park of High Technologies as well.
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