The Russian government has threatened to ban cryptocurrency mining in the past, but it is currently not criminalised at this time as the legal precedents surrounding it are still unclear.
Today, industrial-scale miners have supplanted those who hoped to mine some Bitcoins on old video cards. Prudent blockchain architects designed the system so that the more currency is mined, the harder it becomes to mine it. Therefore, it is only profitable to mine cryptocurrency on an industrial scale.
The mining law in Russia: What you need to know
The government has made numerous threats that mining will be banned in Russia, but mining is not criminalised at this time. The law in Russia still lacks definition when it comes to crypto mining, which leads to various – sometimes extravagant – interpretations by law enforcement agencies.
According to representatives of the government in Russia, there is no question that mining will be banned eventually, along with the introduction of a special tax regime for crypto traders.
The original version of the Russian government’s draft law on digital assets doesn’t contain much information regarding mining, but it should be expanded after refinement. The initial version of the law determines that mining is an activity aimed at creating cryptocurrency. This introduces two categories of miners:
- Household miners that do not exceed the energy consumption limits set by the government.
- Professional miners who should legalise their activities by opening a company or registering as an individual entrepreneur.
Mining cryptocurrency in Russia
A person engaged in crypto mining can theoretically be held accountable for engaging in illegal business activities. After the adoption of this new law however, mining in Russia will become an official occupation.
We can say that the use of cryptocurrency is not illegal in Russia because it is not considered money, but rather a property asset that has some value.
The head of the State Duma Committee on the Russian Financial Market, Anatoly Aksakov, has said:
“I will note that actions with cryptocurrency that are not conditional on Russian legislation will be considered illegitimate. This means that in terms of mining, it will be forbidden to organize the issue, circulation, and exchange of these tools. Administrative liability in the form of a fine will be provided for this. We believe that cryptocurrencies created on open blockchains are illegitimate tools.”
This statement has made many people nervous. But the head of the working group on cryptocurrency in the State Duma, Elina Sidorenko, believes that there will be no fines, and Aksakov’s words are just an attempt to attract the attention of the press and media.
Miner control and electricity tariffs
To fall into the category of a ‘professional’ miner, it is necessary to consider the limits set by the government.
Currently, in every administrative area, there are social norms of consumption. A small rig of several video cards consumes many times more than any social standard.
Therefore, the best option for miners is to move to Russian regions with the cheapest electricity tariffs, which in the future will help turn these localities into industrial mining parks.
Taxes for mining cryptocurrency in Russia
Crypto miners in Russia are required to pay tax to the state in accordance with the nature of their business activities. As a professional miner, individuals will have to pay income tax of 13%. People who do not exceed the established limits of electricity consumption will not be taxed.
It is possible that tax benefits will be applied in the future similar to those in Belarus, where taxation rates are reduced 3-5% for mining.
Remember, if you’re thinking about mining crypto, you should take into account the expenses for the purchase of the equipment, electricity, equipment depreciation, rent, and maintenance, which in the first years of use can significantly exceed the income from mining.
Conclusion
While mining cryptocurrency in Russia is not officially illegal, there is still a grey area that needs addressing before people can be comfortable conducting operations there. The introduction of clear laws and regulations around mining in Russia will bring business and give impetus for the development of innovative projects.
These laws will provide a higher level of security for such activities and should contribute to the development of many related industries.
If you want to find out more about cryptocurrency mining and what you need to get started, check out our guides here.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.