Russia to crackdown on cryptocurrencies with new regulatory bill

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As an analyst with extensive experience in the Russian financial market and a deep understanding of the regulatory landscape, I believe that Russia’s proposed crackdown on cryptocurrencies is a necessary step to assert control over a rapidly growing market that has previously operated mostly beneath the radar. The proposed measures are aimed at addressing concerns around money laundering, terrorism financing, and energy consumption.

Russia is contemplating stricter regulations on cryptocurrencies to assert authority over a market that has largely eluded government scrutiny until now.

The Russian Parliament’s lower house, the State Duma, is currently holding discussions on a proposed law regarding the control of cryptocurrencies in Russia. According to the draft bill, as of September 1, 2024, the circulation of cryptocurrencies will be prohibited outright, with certain exemptions. These exceptions include legally registered miners and projects endorsed by the Russian central bank.

As a crypto investor, if we follow the proposed rules, I would only be eligible to mine digital currencies if I’m a Russian enterprise or individual entrepreneur and my name is on a specific list. For those not included in this registry, we can still mine cryptocurrencies under the condition that we comply with the government’s energy consumption regulations. These guidelines might discourage many from engaging in mining activities due to the potential added challenges and costs.

The bill also forbids advertising digital currencies and the organization of their circulation.

As a researcher studying tax laws in Russia, I can share that a new regulation now mandates me as a Russian miner to report all cryptocurrencies mined, along with the specific crypto addresses where those mined funds have been transferred, directly to the country’s tax office.

As a crypto investor, I understand that lawmakers are concerned about potential misuse of funds and have proposed a measure to address this issue. They argue that this provision is necessary to prevent cryptocurrencies from being involved in money laundering, terrorist financing, or other illegal activities. Furthermore, government entities will hold the power to restrict cryptocurrency mining in certain areas of the country if deemed necessary.

During the summer of 2023, Russia’s finance ministry proposed a ban on cryptocurrency transactions, except for stablecoins and the selling of coins by miners. Yet, this proposal was hindered by Russia’s Federal Security Service (FSB) and the investigative committee.

The legislation regarding cryptocurrencies was previously introduced in the State Duma but seemed to take a backseat amid legislative priorities. However, with economic challenges arising from sanctions imposed due to the ongoing conflict in Ukraine, Russian authorities have suddenly accelerated their efforts to pass this bill and assert control over crypto circulation within their jurisdiction.

The finance ministry, the central bank, and the national financial watchdog have collectively declared that they expect the legislation to be adopted before the end of the Spring session in the State Duma.

As a researcher studying the impact of crypto mining on electricity companies, I can say that the proposed bill bringing regulation to Russia-based crypto miners is a welcome development. Previously, it was challenging for these companies to prove that crypto mining operations were being carried out for commercial purposes, creating uncertainty and potential financial losses. The implementation of the crypto miner registry aims to address this issue. However, I must also acknowledge that the lack of access to affordable electricity could potentially drive some cryptocurrency miners out of business or compel them to relocate to countries where energy costs are lower.

In May, it was announced by Russian authorities that they plan to charge cryptocurrency miners operating at home and illegally tapping into the national power grid. As per a recent report, a team of government advisors has suggested imposing substantial penalties on domestic electricity users who exceed their allotted usage.

Experts have suggested a potential solution for addressing crypto miners using household electricity to avoid power interruptions in certain regions of the country: authorities may implement stricter measures. According to reports, these penalties would be calculated based on commercial rates commonly used for large businesses.

On April 27, a Russian legislator dispelled rumors that Russia intends to ban cryptocurrency transactions within its borders. He reproached media outlets for generating exaggerated headlines rather than verifying accurate information first.

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2024-05-14 14:12