On July 30, the Russian State Duma passed a bill regulating cryptocurrency mining in the country during its second and third readings. The legislation will take effect on September 1.
ForkLog discussed the new regulations and their impact on miners with industry experts.
What Does the Bill Include?
The bill defines terms such as “mining,” “mining pool,” “mining infrastructure operator,” and “digital currency circulation organization.”
Mining will be permitted for Russian legal entities and individual entrepreneurs listed in the relevant registry. Individuals will be allowed to mine cryptocurrencies without being listed, provided they adhere to government-set energy consumption limits.
A separate registry for “mining infrastructure operators” will be managed by the Ministry of Digital Development.
The government, in coordination with the Central Bank of Russia, will separately determine requirements for miners, with Roskomnadzor tasked with ensuring compliance.
Combining cryptocurrency mining with activities in the electricity sector is prohibited.
The bill mandates that miners report to the tax authorities, specifying the address where coins are credited, and grants the government the authority to ban mining in certain regions.
Miners and pools must sell cryptocurrencies in their own name, at their own expense, and in their own interest, without using Russian infrastructure. The appointed authority, in agreement with the Central Bank, may unilaterally prohibit or impose restrictions on digital currency transactions.
The government may impose additional requirements on mining pools.
Advertising digital currencies, mining services, mining companies, crypto exchanges, and crypto exchangers is prohibited. According to deputy Anton Gorelkin, this will help protect uninformed citizens from cryptocurrency-related fraud.
The document does not specify penalties.
What Provisions Were Excluded from the Bill?
By the second reading, the bill had removed a contentious provision on the ban on organizing cryptocurrency circulation. This would have prevented the creation of Russian exchanges and exchangers outside experimental legal regimes.
Thus, alongside foreign trading platforms operating in Russia, a national exchange infrastructure may emerge.
The proposal to ban mining for individuals did not gain support. Deputies deemed existing mechanisms by energy companies sufficient for effective control and prevention of grey and black market mining activities.
Recent news indicates that Russian authorities have begun to view cryptocurrencies “as a tool to circumvent sanctions and a point of high-tech export.”
The Devil is in the Details
The content of the Russian mining bill has been met with mixed reactions from industry companies. On one hand, the establishment of a regulatory framework allows them to streamline processes; on the other, certain provisions are alarming to businesses.
Mike Lvov, Director of PR and Communications at EMCD, told ForkLog that the most contentious issue, in his view, is registration in registries and the provision of full reporting on cryptocurrency mining.
“What will happen with this data is unclear. How and by whom will it be processed? How will this information be used? There are no clear answers to these questions yet,” he explained.
The mechanism for tax payment and the currency in which they will be allowed to pay remain unclear.
Concerns arise from the government’s authority to restrict mining in certain regions. Although deputy Gorelkin claims that the authorities are not interested in upheavals and will use the measure “in exceptional cases.”
Fedor Ivanov, Director of Analytics at SHARD, recalled the Ministry of Finance’s repeated proposals to increase tariffs for miners. Alongside these, the authorities discussed introducing fines.
“First, the proposed regulation needs to work, the industry must fully emerge from the shadows, deal with taxation, possibly receive some preferences, and then we can discuss raising tariffs. Simply increasing tariffs is an ill-conceived idea,” Ivanov says.
He is convinced that pressure on large data centers will reduce Russia’s attractiveness for crypto businesses, and the issue of apartment mining and illegal network connections will remain unresolved.
Russia is one of the leaders in cryptocurrency mining volume, with the largest companies’ revenues exceeding billions of rubles. According to BitRiver, in 2023, the country ranked second globally in terms of computing power used in mining, second only to the United States.