Belarus recently passed the Decree on Digital Economy Development. This law gives significantly more freedom to companies in the special economic zone High Tech Park. It legalizes ICOs (Initial Coin Offerings) and smart contacts–automatically executed agreements hosted on the blockchain. It also gets the government out of the IT business and eliminates taxes on buying, selling, and mining cryptocurrencies until 2023.
Viktor Prokopenya started Viaden Media in 2006. After selling the company in 2011, Prokopenya founded an investment company called VP Capital. He is now an investor in the two of the best-performing companies in High Tech Park. Prokopenya played a key role in developing the new law on Digital Economy.
What are the most important aspects of the new law?
Viktor Prokopenya: The three aspects, which I consider the most important are:
What was your role in forming the new Law on Digital Economy?
Viktor Prokopenya: The idea of the Law was supported by President Aleksandr Lukashenko during his visit to our IT companies in March 2017 (Banuba Development and EXP Capital).
We spoke with the President about the fact that the current legal framework of the High Tech Park does not allow operation of modern IT business models. Improvement of the framework could bring more innovation to the industry and escalate its economic growth. Blockchain is the new Internet. If Belarus were to support it, we would have the chance to become one of the new hubs in this promising new sector.
What was the main motivation behind the new law?
Viktor Prokopenya: The old framework was only good for outsourcing business models in IT. These are low margin businesses and their growth is limited by labour supply (IT engineers).
Product-oriented companies, on the other hand, can create great value with a smaller usage of engineering resources. Moreover, product-oriented companies employ not only engineers, but also a wide range of other professionals: marketing people, business analysts, lawyers, designers, content managers, etc.
However, the law did not support product oriented IT companies or any other business models except for outsourcing. A number of outdated legal restrictions were hindering free movement of services, IP, capital and labour. It was a great challenge to draft this law and to bring Belarusian IT business to a new level of regulation.
Are you most excited about the effects of this law on the IT business, cryptocurrencies, or is it all connected?
Viktor Prokopenya: I like the idea that blockchain is the new internet. I’m delighted to say that Belarus was the first country in the world to establish a fully comprehensive regulation of this technology, including mining, ICOs, cryptocurrencies exchange and turnover, smart contracts and much more.
At the same time, blockchain regulation is backed by the great legal framework of the High Tech Park, which allows four basic freedoms: free movement of services, IP, capital, and labour. It is also important to note that HTP residents are exempt from VAT and tax on profits. Instead, they pay 1% of gross revenue to the HTP administration.
All this makes Belarus a really interesting place to develop an IT business.
It seems like President Lukashenko was impressed by the work you and others in your field are doing. Did it take much convincing for him to issue this reform?
Viktor Prokopenya: Our companies (Banuba Development and EXP Capital) were #1 and #2 in the High Tech Park by revenue per employee. Probably that was the reason why the President decided to meet with us.
From the very beginning, the President understood very clearly that the changes we proposed were purely for the country’s benefit. The country will get new businesses, job creation, increased tax revenue and higher exports.
I read that in 2016, you paid the highest taxes out of any individual in Belarus. How did that, or the high taxes you pay in general, influence your work on this law?
Viktor Prokopenya: I was proud to become #1 taxpayer in the country. However, there is no connection between taxes and our initiatives regarding the law.
What effect do you think this law will have on businesses in Belarus, and specifically High Tech Park? How do you think Belarus as a whole will benefit?
Viktor Prokopenya: The IT sector in Belarus will develop significantly. We will see many interesting projects by HTP companies. We can also expect international IT companies to come to Belarus.
And this will be beneficial for the economy as a whole. According to research, one IT specialist creates 3-4 jobs in other sectors of the economy. So there will be a positive impact for the whole country as well.
You successfully ran your own large business at a young age. Will this law help other young entrepreneurs follow in your footsteps?
Viktor Prokopenya: One of the most important outcomes of the law is that it creates a dream for young people. Americans have the American dream, and we have ours. There is no need to go overseas, you can be successful and become a millionaire here. This is a great inspiration for the younger generation.
It seems the government will only intervene in ICOs if a company breaks its promises to investors. Their role is to enforce a contract as opposed to regulating the industry. Do you see that as the proper role of government?
Viktor Prokopenya: In fact, most of the cryptocurrency regulations will be made by the HTP administration. There will be provisions to protect private investors, as well as anti-money laundering measures. The best world practices in this area will be implemented in the HTP. The government has chosen a very wise approach, in that there will be lower level regulations, which will give more flexibility.
Do you think it is important to experiment with this law in High Tech Park, or do you wish it could be applied to the entire country?
Viktor Prokopenya: There are many regulations which could be applied to the whole country and the country would benefit from them. We assume that after the government sees good results in the IT sphere, many of these regulations will be applied to the entire country.
Does this law represent a healthy competition with other governments in the region? For instance, could this be seen as a response to Estonia’s e-residency program, and plans to launch their own cryptocurrency?
Viktor Prokopenya: Estonia has made great progress in its e-residency program, e-government and its latest plans to launch a state cryptocurrency are really impressive.
Belarus has a different approach; we have created one of the most beneficial legal frameworks for IT businesses. The only Belarusian omission is that we are not an EU member state [smiles].
But in all other aspects, IT businesses can enjoy the best legal framework in the region, if they come to the HTP.