Bill on “Digital Rights” Submitted to the State Duma

A bill developed by Vyacheslav Volodin and Pavel Krasheninnikov has been submitted to the State Duma, aiming to regulate legal relations within the framework of the “digital economy” and introducing the concept of “digital money” (or “cryptocurrency”).

State Duma Speaker Vyacheslav Volodin and Chairman of the State Duma Committee on State Building and Legislation Pavel Krasheninnikov have submitted bill No. 424632-7 to the State Duma, which lays the foundation for regulating legal relations in the “digital economy.”

According to the explanatory note, the “Federal Law on Amendments to Parts One, Two, and Four of the Civil Code of the Russian Federation” aims to establish several basic provisions in civil legislation. These provisions would allow Russian lawmakers to regulate the market for new economic relationship objects existing in the information and telecommunications network (commonly known as “tokens,” “cryptocurrency,” etc.), and to provide conditions for making and executing transactions in the digital environment, including those involving the provision of large amounts of information. In practice, these new objects are created and used by participants in information and telecommunications networks, including Russian citizens and legal entities, but are not recognized by Russian law.

The bill introduces the concept of “digital money” (commonly referred to as “cryptocurrency”) and establishes the main rule: they are not considered legal tender. However, under circumstances and conditions established by law (i.e., in the future), digital money may be used by individuals and legal entities as a means of payment in controlled amounts and under additional regulation.

The bill also notes that, to describe how digital money will circulate, a legal-technical approach is used in the proposed article of the Civil Code—rules on digital rights will apply to digital money.

“This means that the information system must contain records of the holders of digital money, and such money can only be transferred from one person to another through a record. This approach will also allow digital money to be included in the bankruptcy estate of a debtor and in inheritance, but it should be understood that even with a direct provision in the law, this will only be possible when there is a technical capability to forcibly make a record of the new rights holder,” the document states.

The bill introduces the basic concept of “digital right” into civil legislation. The authors propose replacing the term “token,” which “originally referred to a device for identification, but is now used in IT terminology to refer to codes that grant certain capabilities on the network,” with the more traditional Russian legal term “digital right.”

“The essence of a ‘digital right’ as a new legal fiction is similar to that of a security,” the authors state. “Therefore, a digital right is proposed to mean a set of electronic data (digital code, designation) that certifies rights to objects of civil law. Of course, a digital right can only certify rights to things, other property, results of work, services rendered, or exclusive rights.”

To facilitate transactions with digital rights, the bill improves civil law rules on the form of transactions, including contracts. In particular, it is proposed that a person’s expression of will using electronic or other similar technical means will be considered equivalent to a simple written form of transaction.

“For example, if a web page, information system, or smartphone app describes the conditions for pressing the OK button, and it is clear that pressing it is sufficient for a full expression of will. Currently, a significant number of expressions of will are made this way—by pressing a button on a smartphone or a key on a computer,” Krasheninnikov explained.

The bill also establishes that, for the purposes of executing transactions with digital rights, the fact that a transaction was executed by a computer program cannot be disputed, except in cases of interference with the program’s operation.

The document is also intended to legalize the collection and processing of large amounts of anonymized information—big data. To this end, the Civil Code introduces a contract for the provision of information services and expands the concept of a database to mean a “set of data and information.”

“At the same time, it is established that, according to the interests of the parties to the transaction, the contract may provide for an obligation not to take actions that could result in the disclosed information being revealed to third parties,” Krasheninnikov said.

The introduction of this bill, according to the deputies, will not require additional expenses from the federal budget.