Is it legal for a Russian company to conduct an ICO?

The classical ICO (Initial Coin Offering) model, which involves the issuance of tokens followed by their sale for cryptocurrency, cannot be lawfully conducted by a Russian company. This is due to the existing prohibition on the use of digital currency as a means of payment within the territory of the Russian Federation (Part 5, Article 14 of Federal Law No. 259-FZ dated July 31, 2020). Accepting payment for tokens in cryptocurrency would violate this prohibition. Nevertheless, to raise funds, a company may utilize alternative legal mechanisms provided by Russian legislation. These include: • The issuance of digital financial assets (DFAs) in accordance with the same Federal Law No. 259-FZ — through registered operators of information systems; • Or the placement of utility digital rights (UDRs) on investment platforms pursuant to the Federal Law on Investment Platforms (also No. 259-FZ, formerly dated August 2, 2019). Both alternatives require registration with specialized operators and compliance with regulatory requirements but allow for digital financing within the existing legal framework of the Russian Federation.