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The changing geopolitical and economic environment, as well as persistent differences between responsible government institutions, hinder the progress of legislation tailored to regulate cryptocurrency mining in Russia. According to a report citing industry watchers, these factors are stalling the development of the necessary legislation.
Despite the recent market downturn, cryptocurrency mining continues to expand in Russia, the crypto page of Russian business news portal RBC noted in an article. The vast country, which was ranked fifth among mining destinations at the beginning of the year, offers abundant energy resources and suitable climatic conditions.
A recent report also revealed that the consumption of electricity used to run Russian mining farms has increased almost 20-fold over the past five years. With 1.25 gigawatts burned last year for bitcoin (BTC) production alone, the amount of energy used in the crypto mining industry is already comparable to that needed in the country’s agricultural sector.
However, the lack of regulation means that the mining of digital currencies still takes place in the gray economy of Russia. Two dedicated bills are designed to legalize mining, but they still need to be approved by the government before lawmakers have a chance to consider them.
The first draft law was filed in the State Duma, the lower house of parliament, by the New People party in April this year. But the draft law was withdrawn after the legal department in the house gave it a negative assessment. The following month, the Liberal faction resubmitted an amended version, but it was again rejected.
Meanwhile, another piece of legislation was developed by the executive. According to Alexander Sharapov, a lawyer at the consulting firm KSK Group, this bill has better chances as it was prepared with the help of the Ministry of Finance. At the same time, the Central Bank of Russia (CBR) is against the legalization of most crypto-related activities, as proposed by the party and the ministry, and proposes a general crypto ban, the legal expert pointed out.
The main reason why a mining law has not yet been adopted is that various Russian authorities do not have a unified position on the matter, stressed Efim Kazantsev, an expert from Moscow’s digital school. He added that it may take a long time to create a set of rules that will suit all interested government agencies and noted that President Vladimir Putin earlier this year urged the CBR and the government to reach consensus on crypto regulations while highlighting Russia’s competitive advantage as a mining destination.
Kazantsev also believes that the most likely scenario is the adoption of a comprehensive bill such as the Ministry of Finance’s draft law “On Digital Currency.” “There is no point in passing separate laws dedicated solely to mining. It is necessary to regulate both mining and circulation of cryptocurrency. In fact, enough cases have accumulated that require a legal solution,” he commented.
The authors of the mining legislation may also need to update their proposals in response to the changing business climate. According to Yuri Brisov, founder of LFCS Legal Support, the bill drafted by the New People party does not take into account the new conditions for miners as a result of sanctions imposed over the conflict in Ukraine. The penalties have already hit large mining companies such as Bitriver. He is convinced that lawmakers should introduce tax incentives for the sector.
The lack of a legal definition for cryptocurrency remains a key issue concerning the legal status of mining, according to Daniil Gorkov, a lawyer at the Criminal Defense Firm. He says this is the main reason why mining has not yet been regulated. The “Digital Financial Assets” law, which came into force in January 2021, only mentions “digital currency”, and although some officials have indicated that the term includes cryptocurrency in a broader sense, it primarily refers to digital coins and tokens with a specific issuer as a legal entity.
Do you think Russia will regulate its crypto mining industry soon? Share your expectations in the comments section below.
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