Russia’s finance ministry proposes banning miners from receiving bitcoins

The amendments prepared by the Russian Finance Ministry to the law “On Digital Financial Assets (DFA)” ban miners from receiving cryptocurrency.

The agency prohibits earning rewards for mining in cryptocurrency, according to a letter, a copy of which ознакомились “Izvestiya”. Mining itself is allowed, but loses its monetary value.

The ban applies to all transactions with virtual currencies by individuals and sole proprietors, as well as their use as a means of payment. Violators face a fine of up to 100,000 rubles and up to seven years of imprisonment; legal entities face fines of up to 1 million rubles.

The only permissible ways for Russians to obtain cryptocurrency will be by inheritance, assets obtained in bankruptcy proceedings, and enforcement proceedings.

The Finance Ministry remains true to its position, classifying all assets not being foreign currency as surrogates, explains GMT Legal managing partner Andrey Tugarin. Defining cryptocurrency as property does not allow its use for payments within the Russian Federation and raises many related questions:

“The Ministry of Finance does not clarify whether it is possible to gift, exchange, or pledge cryptocurrency, – their task is to restrict the circulation of everything not tied to the ruble. Such a ban will push the industry underground, as enforcing such a norm will be difficult and costly. Probably the only allowed alternative to the ruble will be a crypto-ruble, currently at the project stage.”

The director of 51ASIC Evgeny Zolotoy suggests there is a misprint in the document:

“Most likely, it means that one cannot receive remuneration in traditional currencies, i.e., exchange cryptocurrency for rubles. And anyway, what kind of strange formulation is “remuneration”? Mining is the result of complex computations, which, if a positive result is found in solving a given algorithmic task, accrues the reward provided by the algorithm, including fees that users paid for using the network.”

The expert expressed hope that the amendments will be corrected in due course.

“Otherwise we will see new types of cryptocurrency pools that instantly convert the reward into traditional currencies. Honestly, I would not want such a future. It will inevitably trigger a withdrawal of miners from Russia,” – convinced Evgeny Zolotoy.

Russian miners may attempt to resort to circumvention schemes, such as renting out their equipment to foreign companies and earning revenue outside the Russian Federation, says Sergey Troshin, CEO of the Six Nines data center:

“However, few will go for it, given the risk of criminal liability. If the amendments pass in their current form, this will mean the end not only for mining but for the Russian cryptocurrency market as a whole.”

CMO of Bitriver Dmitry Ushakov believes that discussing the Finance Ministry’s legislative initiative is premature, as it requires serious revisions.

“It is important to understand that the government is not interested in banning mining or halting this activity, as this sphere of business life brings taxes, creates jobs. Data centers that provide equipment hosting services also recycle the surplus electricity generated in Russia. We are monitoring the situation closely and are confident that regulation of this sector will take into account the interests of both the government and the market,” the ForkLog expert said in a comment.

Russian lawmakers have separated the bills “On Digital Financial Assets” and “On Digital Currency.” The provisions of the latter, according to experts, violate the constitutional rights of Russians.

The Finance Ministry first spoke of the need to introduce criminal liability for the circulation of cryptocurrencies in September 2015.

In May 2020, the bills on administrative and criminal liability for violations of the rules for handling digital currencies were presented for consideration to the Ministry of Economic Development.

Experts at the time sharply condemned the initiative, stating that it would not solve the problem of the shadow turnover of cryptocurrencies and would kill the budding legal Bitcoin business in the country.

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