Cryptocurrency and judicial practice. Enlightenment

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For more than a year, our struggle has continued with St. Petersburg prosecutors to appeal court decisions on the recognition of illegal information about bitcoin and cryptocurrency. These decisions have already led to the blocking of many cryptocurrency sites. During the year, we filed 4 complaints from the owners of various cryptocurrency-related portals, and it already seemed that despite all the absurdities of the supervisor’s arguments, it would be impossible to break the vicious practices created in the northern capital. However, the events of recent months inspire some hope that the situation has begun to change for the better. One court decision was quashed at the appeal level in the St. Petersburg City Court. Another is currently being heard by the Supreme Court of the Russian Federation.

All judicial acts contain the same unconfirmed and unjustified conclusion that cryptocurrencies, or rather Bitcoin, are monetary substitutes, the issue and circulation of which is prohibited by Russian law (Article 27 of the Federal Law “On the Central Bank of the Russian Federation”). Also , completely far-fetched constructions that cryptocurrencies are illegal, as they can be used in the “drug trade, weapons, fake documents and other criminal activities”, fall into the lawsuit . Equally well, prosecutors can appeal for a ban on car sales, as they contribute to increased deaths, injuries and injuries.

But if one distracts from formalist sayings, devoid of any meaning, but nevertheless inserted into prosecutorial lawsuits rather to give them weight, and just peer carefully at each court document, then even after a quick reading of the texts of these court decisions, it becomes clear where such the conclusion, the wording and the logic of presentation migrated to the judicial acts - from a warning message from the Bank of Russia on the riskiness of using bitcoins in transactions, which was published on January 27, 2014.

Armed with the position of the Central Bank of the Russian Federation, St. Petersburg courts and the prosecutor's office concluded that it is better to ban information on cryptocurrencies altogether out of harm's way, even if there is no reason for it. Recall that the legal status of cryptocurrencies is still not defined in Russia, and even the Ministry of Finance and the Central Bank, the document of which the prosecutors refer, have only recently decided on how they see the state regulation of cryptocurrencies, but this “vision” has not yet been legally approved - the corresponding draft law has only been submitted to the State Duma.

Below we will tell you how there is an appeal against three court decisions recognizing bitcoin information prohibited for distribution on the territory of Russia.

Localbitcoins.com


In July 2016, another St. Petersburg court ruled to block the international p2p service Localbitcoins.com, which is operated by a Finnish company of the same name. The administration of the service of private ads for the purchase and sale of bitcoins learned about the blocking of its website in Russia only in September from users of the service, and it was possible to find out the reasons for blocking only after contacting the lawyers of the Center for Digital Rights. Roskomnadzor entered the website of the Finnish company Localbitcoins.com into the Unified Register on the basis of a decision of the Primorsky District Court of St. Petersburg dated July 5, 2016 (case No. 2-10224 / 2016).

Guided by the fact of just one legal norm, Art. 27 of the Federal Law "On the Central Bank of the Russian Federation", without a legal definition of a money surrogate or at least an opinion of the currency regulator or an independent expert on the content of the concept of "money surrogate", a judge of the Primorsky district court of St. Petersburg found out all the "necessary "information about the features of using bitcoin, I came to the conclusion that in general all cryptocurrencies are money surrogates (although case No. 2-10224 concerned only bitcoin) and decided to ban the distribution of information about bitcoin posted on the Localbitcoins.com website throughout Russia. Despite the presence on the site of the full contact information of Localbitcoins OY, they were not involved in the case, однако в нём по традиции пассивно участвовал Роскомнадзор, не заявляя никакой позиции либо пояснений по применению положений закона "Об информации", в которых заложены основания для признания информации незаконной и подлежащей блокировке.

It took two sessions to restore the time limit for filing an appeal (they waited for a response from the central office of Roskomnadzor), which ended with a refusal citing the disrespectful reasons for missing the deadline and "going to court well after the month provided by law for filing an appeal."

Having filed a private complaint against the ruling of the Primorsky District Court of St. Petersburg dated January 17, 2017, the lawyers of the Center for Digital Rights described in great detail the procedure followed by Roskomnadzor to restrict access to sites, drew the attention of the court of appeal to the deadlines for blocking and notifications from Roskomnadzor. Nevertheless, on April 13, 2017, the St. Petersburg City Court refused the Finnish company to satisfy a private complaint.

On October 23, 2017, the Presidium of the St. Petersburg City Court refused to consider the cassation appeal against these rulings of lower courts at the hearing, believing that the Finnish company should have known about the violation of its rights when the site was included in the Unified Register (i.e. until the actual lock). At the same time, the refusal of the cassation court’s ruling states that the foreign company “has the opportunity to obtain complete information on the measures taken to restrict access to websites and the grounds for such measures on the Internet at blocklist.rkn.gov.ru”. At the same time, Roskomnadzor is silent that access to the service is closed from foreign IPs.

The second cassation appeal filed with the Supreme Court of the Russian Federation also did not pass the filter of the court apparatus. The Supreme Court of the Russian Federation very succinctly refused Localbitcoins OY to submit a cassation appeal for consideration at a meeting of the cassation collegium, referring to the fact that it did not see any material violations of substantive or procedural law when making decisions in the case of the Localbitcoins.com service. An appeal is ongoing.

Forty Cryptocurrency Exchangers


After the district prosecutors laid the foundation for such decisions, the St. Petersburg prosecutor’s office for especially sensitive facilities went on the war path with cryptocurrencies. Apparently, we missed the moment when the Internet was recognized as a particularly sensitive object. This time it was a wholesale lawsuit to block 40 crypto exchangers at once.

After a lengthy appeal, in which we represented 2 of 40 site owners, at the end of February 2018, the St. Petersburg City Court quashed the decision of the Oktyabrsky District Court on the prohibition of the sites of 40 crypto exchangers, which was issued in May last year at the request of the prosecutor's office. The decision to lift the lock is a small but very important victory, which suggests that the city court at least found a systemic problem of violation of procedural law when considering claims for recognition of information as illegal. The case was sent for a new trial to the Oktyabrsky District Court with a different composition of judges.

«Дело о сорока сайтах биткоин-тематики — квинтэссенция всевозможных нарушений, которые могут быть допущены при рассмотрени требований о признании информации в сети запрещённой!
- Ekaterina Abashina, a media lawyer at the Center for Digital Rights, commented on this situation then. -
Прокуратура северной столицы без разбора заявляла, что на сайтах якобы выпускаются «денежные суррогаты», а по факту под раздачу попали информационные ресурсы, агрегаторы курсов криптовалют, онлайн-обменники. Ни прокуратора, ни суд первой инстанции не предприняли ни единой попытки связаться с владельцами сайтов, хотя возможность написать е-мэйл или запросить информацию у регистраторов доменов есть всегда. Уже на этапе апелляционного обжалования прокуратура предприняла достаточно нелепую попытку доказать, что контактной информации владельцев сайтов в открытом доступе не было, но это не сработало. Апелляционная коллегия воздержалась от оценки вопросов относимости биткоина к денежному суррогату и легитимности запрета на распространение информации о криптовалюте, но признала необходимость привлечения к участию в судебном процессе владельцев сайтов».

Bitcoininfo.ru


In the summer of 2016, the niche information and analytical site Bitcoininfo.ru was blocked , which hosts news and materials about the cryptocurrency Bitcoin. Roskomnadzor entered Bitcoininfo.ru into the register of banned sites on the basis of a decision of the Vyborg District Court of St. Petersburg dated July 18, 2016 (case No. 2-10119 / 2016), which was submitted without the participation of the site’s administration. The trial of blocking the site, as usual, was initiated by the local district prosecutor, and the site administration found out about the judicial act only after the actual restriction of access to it (i.e., at the time of the execution of the court decision, when the month period for appealing it had expired) - classic judicial genre.

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The lawyers of the Center for Digital Rights have achieved the restoration of the missed procedural period - the appeal against the court decision to block the site Bitcoininfo.ru was sent for consideration to the St. Petersburg City Court. The appeal indicated a number of serious “defects” of the appealed decision:

  • the administration of the site Bitcoininfo.ru, which is obviously an interested person in this process, was not involved in the trial;

  • in the current legislation of the Russian Federation there is no prohibition on the dissemination of information about cryptocurrencies, electronic money and new technology for mutual settlements;

  • the site did not offer the implementation on its platform of any transactions between the participants of the cryptocurrency turnover.

In this case, even Roskomnadzor spoke out, usually having no position in such cases, since in the context of such cases it plays the role of a digital bailiff (executes court decisions, enters websites into the registry). Despite significant violations of procedural and substantive law, Roskomnadzor upheld the court's decision to ban the dissemination of information about bitcoin and, in fact, advocated banning the circulation of bitcoin in Russia. Against the background of the ongoing public discussion at that time about the possibilities of legalizing cryptocurrencies in Russia, such a legal position looked rather ridiculous.

On February 13, 2017, a hearing was held in the court of appeal (in the St. Petersburg City Court), which refused in the appeal because “the owner of the site and the administrator of the domain name is not a person participating in the case, the issue of his rights and obligations was not involved in the case, the court did not allow, and the statement of the prosecutor of the Vyborgsky district of St. Petersburg only the issue of establishing the legal status of the information material posted on the website, which is of legal importance for the inclusion of information in the Unified Register ”.

The Presidium of the St. Petersburg City Court refused to transfer the complaint for consideration at the hearing for the same reasons as the Board of Appeals, after which we appealed to the Supreme Court of the Russian Federation with the second appeal. First, the consultant of the Supreme Court of the Russian Federation decided in a simple way to return the cassation appeal filed by the lawyer, because the copy of the diplomas confirming the presence of a representative of a legal education was not attached to the complaint. The consultant of the court referred to the new procedure established by the provisions of the Code of Administrative Procedure of the Russian Federation, although the appealed court decisions were adopted in accordance with the Civil Procedure Code of the Russian Federation, and in the end it was not very cleverly referred to - according to the rules of the CAS of the Russian Federation, the lawyer does not need to attach copies of his diplomas.

After re-filing the cassation appeal to the Supreme Court of the Russian Federation in November 2017, the case materials were still requested from St. Petersburg and the Bitcoininfo.ru case file was scheduled for consideration on March 21, 2018. It is worth noting that this is the first blocking case web portal, which for 6 years of enforcement of the law "on black lists of sites" is considered in the Supreme Court. And this gives us some hope that the highest court finally showed interest both in the issue of web censorship, which is very painful for Russian society, and in the topic of the legal status of cryptocurrencies.

However, on March 21, a substantive review did not take place, and the hearing on the case was postponed until April 20, 2018 due to the late submission of an objection by the St. Petersburg prosecutor on the complaint and the need to study additional materials, namely the position of the leading specialized association RACIB and the Internet ombudsman Dmitry Marinichev, who, as amicus curiae, submitted a conclusion to the court regarding the status of bitcoin.

RACIB stated that it is impossible to classify information about cryptocurrencies as prohibited for distribution.

In its explanation, the RACIB claims that there are no norms in the legislation of the Russian Federation on the basis of which it is possible to limit the dissemination of information about bitcoin and cryptocurrencies. In addition, there are no norms restricting the circulation of bitcoin and cryptocurrencies. Prior to the adoption of normative legal acts, at the disposal of entrepreneurs engaged in activities related to crypto assets, there are positions of state bodies, which, despite the fact that they do not have direct effect, can serve as guidelines for market participants. These documents are aimed at warning about the risks of cryptocurrency transactions, but none of them mention restrictions or prohibitions on the circulation of crypto assets in the Russian Federation.

The law also does not provide for liability for the production and storage of a monetary substitute. The Criminal Code pursues the manufacture, storage, transportation and sale of counterfeit money - copies of existing banknotes, and not the production of its own currency.

Internet Ombudsman Dmitry Marinichev also confirms that Russian legislation does not provide a basis for restricting the dissemination of information about bitcoin and cryptocurrencies. Neither the Administrative Code of the Russian Federation, nor the Criminal Code of the Russian Federation contain a single norm stipulating responsibility for the dissemination of information about the Bitcoin cryptocurrency, or about electronic means of payment or other currencies other than the ruble. Even the CBR authorship norm on a general ban on introducing monetary units in Russia in addition to the ruble and issuing “monetary surrogates” does not impose any restrictions on the dissemination of information about various monetary units, means of payment and technologies used in the modern world, as well as determines what is a "money surrogate."

Marinichev also stressed that at present, cryptocurrency has an undefined legal status in Russia, however, there is no legislative ban on the circulation and use of cryptocurrencies by Russian citizens.

The Internet Ombudsman believes that until the Russian legislative body has developed special rules defining the status of cryptocurrencies, at present, one should focus on the general permissible method of civil law and be guided by the normatively-fixed principle of freedom of contract (Articles 1, 421 of the Civil Code of the Russian Federation).

Despite the fact that Bitcoin does not have collateral in gold or other currencies, as, indeed, other modern fiat money, it can still be exchanged for fiat currencies at exchangers, ATMs and exchanges that legally operate in many countries around the world. to the world. It is also possible to exchange for tokens for participating in a certain new project based on distributed registry technology. The exchange rate of bitcoin is determined by the exchange principle at the intersection of supply and demand.

Recall that the Bitcoininfo.ru case is the first complaint by the site owners regarding the blocking decision that came before the Supreme Court. The decision on this process can become a precedent for all cases of blocking cryptocurrency sites.

We hope that the Supreme Court will heed the opinions of experts and make the right decision that will have a positive effect on the development of cryptocurrencies and the introduction of the digital economy in our country, as well as create a number of important recommendations for courts on the procedure at the level of judicial practice recognition of information as illegal.

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