“Belarus will become the first government in the world that opens wide opportunities for the use of blockchain technology”, said in a statement on the official website of the President of Belarus. Alexander Lukashenko, who signed the new law of the land, believes that his county “has every chance of becoming a regional center in this area.”

The Presidential Decree of the Republic of Belarus No. 8 "On the development of digital economy" came into force begining of this year. The Decree legalizes business based on blockchain – the technology underlying cryptocurrencies such as bitcoin, and contains a number of progressive legal provisions aiming to stimulate the development of IT-sphere in Belarus. The existing Belarusian High Technology Park (HTP), already the most attractive place in the region for high-tech companies, IT professionals and start-ups, will become a legal tech enclave where companies working with digital currencies will pay no taxes and rely on some elements of English law in commercial matters. HTP is about to become a home for projects with technology of recording and storage of data as distributed database (aka blockchain).

The existing regime of tax preferences for HTP residents is extended until 2049

HTP is already enjoying a special tax and legal regime in the Republic of Belarus, contributing to the favorable and successful development of IT business. It is being called a Belarusian Silicon Valley – referring to that in the USA. The companies registered in it can enjoy all the advantages provided, regardless of the location of their Belarusian office. Tax benefits for HTP residents is one of main advantages which include reduced rate of income tax (9%) and payments to the National Social Security Fund (NSSF), which are calculated on the basis of the average salary in the state, as well as exemption from income tax and VAT - being replaced by the payment of 1% of gross profit to the HTP Administration.

More rights for HTP residents

The Decree stipulates a number of additional rights for HTP residents: training and education activities in the field of information and communication technologies; activities in the field of cyber sport; activities in the field of artificial intelligence and creation of systems for unmanned vehicle control. But the most groundbreaking part of the Decree deals with development, maintenance, implementation, operation of software and hardware using blockchain, other distributed databases, cryptocurrency mining, enabling HTP residents to be a cryptographic platform operator, a cryptocurrency exchange operator, and to be involved in other activities using tokens. And if need be this list can be updated and extended by HTP Supervisory Board.

HTP resident as a cryptographic platform operator and the cryptocurrency exchange operator

According to the Decree, a cryptographic platform operator helps individuals and legal entities, including non-residents, to buy, sell or exchange tokens for Belarusian rubles, foreign currency, electronic money, etc.

A cryptocurrency exchange operator helps to exchange tokens of one type for another type, to buy and sell them for Belarusian rubles, foreign currency, and electronic money. It operates on its own behalf and in its own interests. The only limitation in such activities is the requirement that operations of buying and selling tokens with residents of the Republic of Belarus should be made only in Belarusian rubles – the national currency.

All legal entities (not only HTP residents) have the right to own tokens

Moreover, the Decree provides legal entities with rights to perform the following types of transactions with tokens:

• to create and place their own tokens in Belarus and abroad through HTP residents;
• to store tokens in virtual wallets;
• to acquire, dispose of tokens, and perform other transactions with cryptocurrency through cryptographic platform operators, cryptocurrency exchange operators, other HTP residents carrying out the corresponding type of activity.

All individuals have the right to own tokens

The Decree provides individuals with the right to own tokens and perform the following types of operations with them: mining, storage of tokens in virtual wallets, exchange of tokens for other cryptocurrency, acquisition of tokens, disposition for Belarusian rubles, foreign currency, electronic money, donation and testament of tokens.

No taxation for transactions with tokens until 2023

One of the distinctive features of the Decree is complete exemption of HTP residents from taxation of transactions with tokens. It means that HTP residents won’t need to calculate and pay VAT, profit tax on turnover, profit tax on mining activities, as well as on creation, acquisition, alienation of tokens. Individuals are totally exempt from taxes on profits made from tokens and cryptocurrency. It means that they don’t pay income tax on mining, acquisitions, alienation of tokens for Belarusian rubles, foreign currency, electronic money, other types of tokens. Tokens are not required to be declared at all.

Those companies (legal entities) and self-employed entrepreneurs that are not residents of HTP also benefit from the Decree. However, they are exempt from profit tax only if they exchange tokens with other types of tokens (for example, exchange of bitcoin for ethereum). In case when they exchange tokens for fiat money, and there is a profit from this operation, they should pay an income tax.

For accounting purposes acquired tokens are recognized as assets.

Legal entities that have created tokens have obligations to tokens’ owners.

English law for HTP residents

To ensure its transborder significance and international scope, the Decree puts into effect some expedient elements of English law in commercial matters:

• convertible loan – allows an investor to invest in start-ups without being a part of the company’s founders;
• option and option agreement – allows IT companies to offer options to buy shares of the company at par value;
• indemnity agreement (or an agreement on reimbursement of property losses) – is a generally accepted mechanism for protecting the parties during purchase and sale of business and investing in EU and USA);
• non-competition agreement with an employee;
• non-solicitation agreements with third parties and counterparts to prohibit the luring of employees;
• irrevocable power of attorney.

In addition, the founders of HTP residents are permitted to apply foreign law to shareholders’ agreements. It means that now they will be able to attract foreign capital structured in accordance with foreign law.

In practical terms it implicates that establishment of these institutions (of English law) in Belarus creates a favorable environment for the development of the venture system, and provides potential investors with tools that are understandable to them and widely used in international practice.

Smart contracts

Belarus has become the first state in the world to introduce and legalize smart contracts at the state level. According to the Decree, a smart contract – is a program code intended for functioning in blockchain, or other distributed information system for the purpose of automated execution of transactions. So far it is one and only official definition of smart contract in international practice, since currently it is being only developed by the International Organization for Standardization (ISO) on the level of general approach.

No more law restrictions for general business

The Decree abolishes subsidiary liability for HTP residents, except for cases when bankruptcy is connected with intentional actions of such persons, which led to criminal liability. HTP residents can establish the size of the penalty in contracts upon mutual agreement of the parties. Governmental audit of HTP residents should be agreed with the HTP Administration. HTP residents no longer need work permits for foreign employees. Moreover, foreign exchange controls, licensing, and anti-money laundering regulations don’t apply to transactions involving HTP residents.

Efficiently, Belarus becomes the first jurisdiction in the world with a comprehensive legal regulation of businesses based on blockchain technology. The Decree has created legal conditions for ICO, use of cryptocurrency and introduction of smart contracts.

After the 22nd of March – when the Decree No. 8 comes into force – Belarus becomes an attractive option for the withdrawal of cryptocurrency into fiat currency.

Developers of the Decree’s hope that by 2030 the number of employed in the Belarusian IT sector will increase more than three times (from 30 000 to 100 000 people), the export earnings will increase almost five-fold (from 1 billion to 4.7 billion dollars), and foreign investment will quintuple (from 0.8 billion to 4 billion USD).

Certainly, some provisions of the Decree are not self-sufficient and require the adoption of other legal acts for more specific understanding of the legal regime created in the Republic of Belarus related to blockchain and cryptocurrencies. But that will be done on an as-needed basis.