Public control in the sphere of creation and turnover of cryptocurrencies in Russia (public law analysis)

Malinovskii Oleg Nikolaevich ORCID: 0000-0001-6541-9046 PhD in Law Associate Professor; Department of Civil Procedure and International Law; Kuban State University 350040, Russia, Krasnodar Territory, Krasnodar, Stavropol str., 149 niipgergo2009@mail.ru Other publications by this author     Goncharov Vitalii Viktorovich PhD in Law Associate Professor; Department of Civil Procedure and International Law; Kuban State University 350040, Russia, Krasnodar Territory, Krasnodar, Stavropol str., 149 niipgergo2009@mail.ru Other publications by this author

Petrenko Elena Gennad'evna PhD in Law Associate Professor of the Department of State and International Law, Kuban State Agrarian University named after I. T. Trubilin 350044, Russia, Krasnodar Territory, Krasnodar, Kalinina str., 13 niipgergo2009@mail.ru Other publications by this author

Introduction.

This article is devoted to the public law analysis of the organization and implementation of public control measures in the field of creation and turnover of cryptocurrencies in the Russian Federation. The purpose of the study is not only to formalize and analyze modern problems that hinder the organization and implementation of public control measures in relation to public relations related to the issuance and turnover of cryptocurrencies, but also to develop and justify a system of measures to resolve them. At the same time, the object of the study is public relations related to the organization and implementation of public control in the Russian Federation (including in relation to public relations related to the issuance and circulation of cryptocurrencies), and the subject of the study is the norms of current legislation on public control, materials of the scientific legal doctrine of public control, materials of practical activities of subjects of public control.

Literature review.

The problems of legal regulation of the creation and turnover of cryptocurrencies in the Russian Federation are widely studied in the works of T. A. Batrova, ^{[1, pp. 3-8]} A.V. Gabova, ^{[2, pp. 55-65]} N. V. Gladych, ^{[3, pp. 67-72]} M. A. Egorova, ^{[9, pp. 10-15]} A. S. Erashova, ^{[10, pp. 1024-1027]} K. B. Razdorozhny, ^{[12, pp. 153-157]} L. V. Reshetova, ^{[13, pp. 12-20]} E. E. Rovina, ^{[14, pp. 81-84]} Y. V. Truntsevsky, ^{[15, pp. 18-28]} B. A. Khairullin, ^{[16, pp. 387-389]} as well as a number of other authors. However, the proportion of works devoted to the analysis of the possibility and necessity of civil society control over public relations related to the issuance and turnover of cryptocurrencies in Russia seems insignificant, which is why the choice of the topic of this scientific research is determined.

Materials and methods.

In the course of the conducted scientific research, a number of methods were used: formal-logical; comparative-legal; historical-legal; statistical; sociological. The research materials were doctrinal sources devoted to the organization and activities of subjects of public control in the Russian Federation, as well as the legal regulation of the issue and turnover of cryptocurrencies in Russia and in the world, the results of sociological research on the practice of functioning of these subjects, as well as statistical data on their organization and activities.

The results of the study. Discussion.

In the Russian Federation, which is a legal democratic state with a republican form of government, a person, his rights and freedoms are positioned as the highest value in society and the state, the protection, implementation and protection of which the whole meaning of the activity of the public administration system in the state is aimed at. In this regard, the country's Constitution has consolidated the legal status of the multinational people of Russia as the bearer of sovereignty and the only source of power in the state, exercising its powers through a system of direct and indirect forms of democracy. At the same time, the system of constitutional principles (first of all, democracy and participation of citizens of the Russian Federation in the management of state affairs), as well as the system of human and civil rights and freedoms, need a system of legal guarantees ensuring their implementation, protection and protection. This system includes: a constitutional prohibition, under threat of legal liability, to seize power and illegally retain powers; a system of checks and balances in the mechanism of public power, which does not allow the concentration of all powers in the hands of one public authority, a branch of government, or in the hands of any official of a public authority; the bodies of constitutional control and supervision, the most important of which are the Institute of the President of the Russian Federation (as the guarantor of the Constitution, the rights and freedoms of citizens) and the Constitutional Court of the Russian Federation (acting after the abolition of the institute of constitutional (statutory) courts of the subjects of the Russian Federation as the only body of constitutional justice); the system of civil society institutions, the most important of which is the institute of public control through the implementation of which citizens and public associations (other non-governmental non-profit organizations) have the opportunity to participate in the implementation of measures to control the activities, acts and decisions of state authorities, local governments, state and municipal organizations, other bodies and organizations endowed by federal laws with the right to exercise certain public powers.

Among the constitutional rights and freedoms of citizens of the Russian Federation, socio-economic rights and freedoms occupy an important place. The Russian Constitution has enshrined a significant number of socio-economic human and civil rights and freedoms, for example, the right to private property (Article 35), freedom of entrepreneurial activity (Part 1 of Article 34, the right to freedom from monopolization and unfair competition in certain sectors of the economy (Part 2 of Article 34), etc.

However, since the adoption of the Constitution of the Russian Federation in 1993, the economic system in Russia and in the world has become significantly more complicated. During this time, the world has developed technologies of the fifth technological order to the maximum extent possible and the economy is transitioning to the sixth technological order everywhere. At the same time, digital technologies, that is, technologies related to electronic computing and data transformations, occupy a significant place in the core of both the fifth and the new technological order. Cryptocurrencies are the most important element and practical embodiment of modern digital technologies.

In this regard, the system of economic rights and freedoms in the Russian Federation is being supplemented with more and more new rights and freedoms due to the development of modern technologies, which is reflected, in particular, in the rapid development of Russian civil, financial, and tax legislation, for example, in the adoption of a significant number of new federal laws in the field of digital economy: from 07/31/2020 No. 259-FZ "On Digital Financial Assets, Digital Currency and on Amendments to Certain Legislative Acts of the Russian Federation" (which introduced into legal circulation and partially detailed the concept of digital currency); dated 07/24/2023 No. 339-FZ "On Amendments to Articles 128 and 140 of Part One, Part Two and Articles 1128 and 1174 of the third part of the Civil Code of the Russian Federation" (which enshrines the term "digital ruble", details the basics of its incorporation into trade, financial turnover, as well as other forms of use).

In Russia and in the world, the share of cryptocurrencies in the volume of financial assets, both individuals and legal entities, is rapidly growing. In some countries, investments in cryptocurrencies are carried out even by public organizations, public authorities (for example, by placing budget funds, assets of budget funds, development funds, etc.).

What should be understood by cryptocurrency? Cryptocurrency is a kind of digital currency, in the process of issue and turnover of which there is no internal or external administrator, or its equivalent, thereby ensuring the decentralization of the payment system within the framework of this cryptocurrency, which is not a material object in the form of a certain sequence of digits denoting a certain number of units of this cryptocurrency, recorded in the appropriate position of the information a data transfer protocol package (which, along with information about transactions with this cryptocurrency, can be encrypted, but this circumstance is not a prerequisite for classifying this type of digital currency as cryptocurrencies).

Russian legislation does not detail the concept of "cryptocurrency", using the more general concepts of "digital financial asset", "digital currency of the Central Bank", "digital ruble", etc.

Why is the institute of "cryptocurrencies" so important for the Russian economy?

Firstly, the total cryptocurrency market in the world today amounts to an amount significantly exceeding one trillion dollars (a significant amount of which is accounted for by Bitcoin). At the same time, research by a number of authors shows that citizens of the Russian Federation occupy an increasing place among the owners (nominal holders) of cryptocurrencies. ^{[9, pp. 10-15]} Thus, to date, a certain part of the financial turnover in our country has been withdrawn into cryptocurrencies.

Secondly, cryptocurrencies (even relatively stable in the short and medium term) are characterized by huge volatility. In particular, the bitcoin exchange rate has increased more than a billion times since its initial release in 2009. In some periods of time, its rate fell by 5 or more times. The exchange rate of less stable cryptocurrencies is subject to greater volatility, while a significant number of cryptocurrencies have lost their exchange value completely (it is equal to 0, or the exchange value close to this value). In this regard, Russian citizens investing in cryptocurrencies have a significant chance of completely losing their invested funds.

Thirdly, as noted by a number of researchers, ^{[3, pp. 67-72; 11, pp. 192-199]} cryptocurrencies are largely used by organized crime, cybercriminals, or for illegal withdrawal of funds and countries where these funds were received. Consequently, transactions with cryptocurrencies affect the crime rate, which undermines the economic basis of statehood.

Fourth, income from the growth of the exchange rate value of cryptocurrencies, due to the fact that they are issued abroad, quotations are conducted on foreign or virtual platforms, it is difficult or impossible in some cases to identify and subject their owners to taxation, which undermines the foundations of the state's tax system.

Fifthly, it is no secret to anyone that the profitability of the production (mining) of cryptocurrencies is determined by two important components: the cost of a kWh of electricity (which is consumed by electronic computing devices of the so-called "mining farms"), as well as the average ambient temperature of the mining site (so these devices heat up during use, and the lower the temperature, the less electricity is spent on cooling them). The Russian Federation, due to the fact that it is located in the northern latitudes, and also has a low cost of kWh (average) of electricity, attracts investors of mining farms. In a number of regions of the country (for example, Dagestan) this has become a regional national disaster, since a significant part of the energy capacity is already there (in particular, in the previously mentioned Dagestan - an energy-deficient region!!!) It is spent on underground mining farms, which undermines the economy of the regions.

In this regard, we believe that public relations related to the creation and circulation of cryptocurrencies should be one of the objects of public control.

However, the organization and implementation of public control over public relations related to the creation and circulation of cryptocurrencies are accompanied by numerous problems, among which the following can be distinguished:

Firstly, a significant problem is the fact that the term "cryptocurrency" is not fixed and detailed in Russian legislation. Due to the fact that these types of digital currencies already occupy a significant amount in financial transactions in the world, it requires the development and adoption of a separate Federal Law "On the legal status and turnover of cryptocurrencies in the Russian Federation", in which the legislator must determine the position of the state regarding this financial instrument: are public relations on the issue and turnover of cryptocurrencies in a legal in the legal field, or this activity is illegal. If, in general, this activity is recognized as illegal, then this will require amendments to criminal and administrative legislation with the consolidation of measures of criminal and administrative liability of persons engaged in the issuance and turnover of cryptocurrencies on the territory of the Russian Federation.

Secondly, the fact that the Russian Constitution has not consolidated the concept and content of the institution of public control, which is formalized only at the level of federal laws, is also a serious problem. This reduces the authority and importance of this institution of civil society both in the eyes of ordinary citizens and officials of public authorities. The solution to this problem is seen in the introduction of amendments and additions to the Basic Law of the country, which will consolidate not only the concept of public control, but also detail its principles, forms, methods, types of measures, their bases and limits of implementation, a list of objects and subjects, or an exhaustive list of identifying features.

Thirdly, an important problem hindering the organization and implementation of public control in relation to activities related to the issuance and turnover of cryptocurrencies in Russia is the restriction of the limits of public control in Federal Law No. 212-FZ dated 07/21/2014 "On the Basics of Public Control in the Russian Federation", when activities, acts and decisions of individuals, as well as commercial legal entities (except those who exercise certain public powers on the basis of federal laws). This restriction does not seem to be justified. For example, this restriction removes public relations related to the issuance and turnover of cryptocurrencies from the list of objects of public control, which makes this object of enormous economic importance generally invisible to control by civil society. At the same time, the participation of millions of Russians in the circulation of cryptocurrencies is fraught with risks of violation of their rights, freedoms, and legitimate interests. The solution to this problem, as we noted in previous studies, ^{[4, pp. 186-188; 5, pp. 194-196]} is seen in the consolidation of the concepts of "public control system", "object of public control" in the legislation on public control. At the same time, the concept of an object of public control should cover, for example, any commercial activity, acts and decisions that affect the rights and freedoms of an individually indefinite circle of persons, regardless of whether this activity was carried out by an individual (self-employed or individual entrepreneur), or a legal entity.

Fourth, a significant problem is the fact that subjects of public control have a weak organizational, technological, property, and financial base for organizing and implementing public control measures (especially in relation to such an object as public relations related to the issuance and turnover of cryptocurrencies). Conducting public control in this area requires the use of expensive equipment, information programs, as well as the availability of highly qualified specialists in the field of cybersecurity, information systems and technologies. The solution to this problem is seen through the development and adoption by the Government of the Russian Federation, after consultations with the Public Chamber of the Russian Federation, of a system of federal programs, the action of which will be aimed at developing the organizational, technological, property, and financial base of subjects of public control.

Fifthly, an important problem hindering the organization and implementation of public control over activities related to the issuance and circulation of cryptocurrencies in Russia is the fact that subjects of public control are practically not endowed with any real powers, unlike, for example, as we have already noted in previous studies, ^{[6, pp. 127-130; 7, pp. 199-202]} from the organs of national control of power in the USSR. This significantly reduces the efficiency and effectiveness of their activities. The powers of subjects of public control are mainly advisory, auxiliary, optional in nature. In order to suppress, prevent and prevent violations of human and civil rights and freedoms, the rights and legitimate interests of public associations and other non–governmental non-profit organizations, these entities need to apply to public authorities, including law enforcement agencies (primarily the court). The solution to this problem is seen, for example, in granting representatives of subjects of public control a number of real rights. With regard to the research topic, in particular, subjects of public control can be given the rights to suspend the activities of mining farms, arrest their property, primarily equipment and flash media, and the possibility of imposing fines on officials of private business entities that violate legislation regulating digital financial assets.

In addition, the solution to the problem (in relation to the topic of this study) would be the creation of a specialized public control entity (in the status of a different organizational structure of public control in the terminology of Federal Law No. 212-FZ dated 07/21/2014 "On the Basics of Public Control in the Russian Federation"), for example, in the form of a public digital technology inspectorate. This would allow the accumulation of modern digital technologies in the activities of this subject of public control. ^{[8, pp. 196-200]}

Sixth, in our opinion, a significant problem is the weak use by subjects of public control in Russia of the positive foreign experience of the institutions of civil society control over certain objects of civil control. This experience is also poorly used in the development of legislation on public control. This, in particular, concerns the control of public relations related to the issuance and circulation of digital currencies (primarily cryptocurrencies). Abroad, the state is increasingly resorting to the help of various civil society institutions in this matter, which makes it possible to identify and suppress illegal activities related to the illegal creation and trafficking of the above-mentioned digital financial assets in almost real time. The solution of this problem should be entrusted to the Public Chamber of the Russian Federation, based on the relevant federal ministries and departments, by collecting, analyzing and adapting the positive experience of civil society institutions monitoring the above-mentioned objects (with its subsequent inclusion in the legislation on public control).

Conclusion.

In the course of our scientific research, we have made a number of conclusions, among which the following can be distinguished:

1. The Institute of Public Control acts as the most important legal guarantee for the implementation, protection and protection of not only constitutional principles, but also the entire system of human and civil rights and freedoms, as well as the rights and legitimate interests of public associations and other non-governmental non-profit organizations.

2. Due to the rapid development of digital technologies, public relations related to the issuance and circulation of digital currencies, primarily cryptocurrencies, which, in our opinion, act as promising objects of public control, have a significant impact on the country's economy.

3. However, the organization and implementation of public control measures in relation to public relations related to the issuance and circulation of cryptocurrencies are associated with numerous problems requiring: the formalization of this institution of civil society in the Constitution of the Russian Federation; the consolidation and detailing of the concept of "cryptocurrency" in Russian legislation (for example, through the adoption of the Federal Law "On the Legal Status and cryptocurrency turnover in the Russian Federation"); consolidation in the legislation on public control among its objects of activity related to the issuance and turnover of cryptocurrencies; intensification of the processes of analysis, adaptation and implementation into Russian legislation of foreign experience in controlling civil society in this area; adoption and implementation of a system of federal programs aimed at the development of organizational, property financial, technical foundations of the organization and activities of subjects of public control; creation of specialized subjects of public control over public relations related to the issuance and turnover of cryptocurrencies.