The Russian Senate has given the green light to the Russia Crypto Mining Law, allowing it to advance to the next stage pending President Vladimir Putin’s approval. While this development has elicited some optimism among Russian Bitcoin (BTC) miners, others remain skeptical about its implications.
Details of the Legislation
The Federation Council has not only approved the Russia Crypto Mining Law but also a secondary bill regarding “experimental foreign trade settlements” in cryptocurrency. Under this new legislation, both “legal entities” (industrial mining firms) and “sole proprietors” (individual miners) will be permitted to mine cryptocurrencies, so long as they register in a national database. This aspect of the Russia Crypto Mining Law is particularly encouraging for small-scale, home-based miners, who will be allowed to continue mining as long as they adhere to government-set “energy consumption limits.”
Additionally, the legislation gives the government the authority to impose bans on mining activities in “certain energy-deficient regions.” Politicians anticipate that President Putin will sign the Russia Crypto Mining Law and accompanying measures early this week, with various reports indicating that the law will take effect on September 1, 2024.
Mixed Reactions Among Miners
Miners in Russia have been advocating for the legalization of their industry for several years, but a prolonged political deadlock had previously left them in a state of uncertainty. Recent advocacy efforts and electrical power shortages in key mining regions have seemingly catalyzed a change. Putin’s acknowledgment of the “urgent need” for regulatory oversight of cryptocurrency mining, due to the potential for “uncontrolled growth” in electricity consumption leading to regional power shortages, was a pivotal moment in these developments. Following this, the State Duma expedited the law’s legislative path, approving both second and third readings in a single day on July 30.
While the Russia Crypto Mining Law is viewed as a positive step by some, not all miners are celebrating. The law will provide clear legal definitions for terms like “mining” and “mining pools,” while also establishing a registry for “mining infrastructure operators” under the authority of the Ministry of Digital Development. Furthermore, the Federal Service for Supervision of Communications, Information Technology, and Mass Media, known as Roskomnadzor, will oversee compliance with the law.
A significant restriction within the Russia Crypto Mining Law prohibits electrical companies from launching their own mining operations directly. Additionally, miners must disclose all earnings to tax authorities and report their cryptocurrency wallet addresses. A controversial element of the law stipulates that both individual miners and mining pools are required to sell their mined coins “without using Russian infrastructure.” This provision compels Russian miners to resort to international cryptocurrency exchanges for their transactions.
Russia Crypto Mining Law: Concerns Over Future Sanctions
Concerns have arisen regarding potential sanctions from US and Western nations in response to these developments, particularly regarding trading platforms that engage with Russian miners. However, some Russian media have speculated that a “national exchange infrastructure” may be introduced in the near future.
The reception of this Russia Crypto Mining Law has been mixed among miners. Some regard it as a significant breakthrough, labeling it a “historic event” while others have expressed apprehension. Forklog reported that many miners are conflicted about the draft law, acknowledging that a formal regulatory framework could facilitate operations. However, several provisions evoke concerns among businesses.
Mike Lvov, the PR and Communications Director at the mining firm EMCD Tech, articulated worries over the implications of having to register and disclose full details of cryptocurrency activities. He questioned the handling of such data, particularly who would process it and for what purposes.
While lawmakers assure the public that government agencies will only intervene in “exceptional cases,” many in the mining sector remain doubtful. Some experts, like Fedor Ivanov of the crypto security firm Shard, have raised alarms regarding the potential for increased energy costs. According to Ivanov, there is a pressing need for the new regulations to be effectively implemented so that the industry can emerge from the shadows and address taxation issues. He cautioned that merely increasing energy tariffs would not benefit the industry and could diminish Russia’s appeal in the global crypto market.
The Future of Bitcoin Mining in Russia
Overall, most industry observers believe that Bitcoin dominates the Russian cryptocurrency mining landscape, with over 90% of miners primarily focused on BTC. The future implications of the Russia Crypto Mining Law remain to be fully understood, particularly how these new rules will affect the operational landscape for Russian miners moving forward. Stay tuned for more updates on this evolving story on the Turkish NY Radio.
