Russian Finance Ministry Outlines its Vision of Bitcoin Mining Regulation
Russia’s Ministry of Finance has explained how it plans to regulate – and tax – the nation’s crypto mining sector.
Per Izvestia, the ministry explained that parties would only be able to mine Bitcoin (BTC) and crypto if they had previously applied to join a special register of crypto miners – and credit their token earnings to “wallets that are within a framework of Russian software.” This likely means that a list of approved wallet providers will be drawn up, and that miners will be forbidden from using overseas wallets.
The ministry is hopeful of gaining cabinet approval for its bill, which it submitted earlier this week, despite a rival proposal from the Central Bank. The bank has instead proposed a blanket ban on mining. The latter is looking increasingly unlikely, with Russia now facing international sanctions over the Ukraine crisis – while its crypto mining sector continues to grow.
The ministry said it expected the bill to be approved and come into force on January 1, 2023.
Perhaps key for miners is the clause in the bill that pertains to “digital mining” – giving the industry a legal definition and official “business” status.
The terms of the bill, as it stands, see “digital mining” defined as “the acquisition of digital forms of currency.”
It also calls a “mining pool” the “combination of the computing power of several devices designed for digital mining.”
A separate section of the bill is devoted to the regulation of crypto mining, the ministry added. Miners in Russia will be obliged to take the following steps if the bill becomes law:
- they will have to report their incomes to the Federal Tax Service;
- home or small-scale miners will have to register as “individual entrepreneurs,” but will be exempted from this if they stay within private household energy consumption limits established by the government;
- mining data centers will need to be owned by a recognized Russian legal entity;
- miners will need to join the aforementioned register, and they will also need to comply with other provisions in the bill about crypto ownership declarations – and specify that their income comes from mining.
However, the bill – crucially – states that crypto mining would be assigned an official OKVED number. In Russia, OKVED numbers are classifiers of officially recognized forms of economic activity.
The proposals were welcomed by some industry professionals, who Izvestia quoted as stating “meet the interests of the market and maintain a balance of interests.”
Vladimir Gorbunov, the CEO of the Choise.com crypto ecosystem and the Crypterium crypto wallet provider, claimed that the Federal Tax Service had the “expertise” required to maintain such a register of miners.
But in a blow for small-scale bitcoin (BTC) miners, he added that the limits on exemptions from the business registry would provide insufficient power for bitcoin mining. As such, Gorbunov stated that only registered businesses – which pay higher electricity fees – would likely be able to mine BTC if the law were passed in its current form.
Gorbunov also pointed out certain ambiguities in other sections of the bill, particularly in articles pertaining to crypto exchanges. He noted that the terms “digital currency exchange operator” and “digital trading platform operator” were mentioned interchangeably throughout the bill, and suggested that such terms’ interpretation “could lead to significant discrepancies in the future.” The ministry refuted the claim.
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