Recent developments in Russian legislation have significant implications for the country’s cryptocurrency mining industry. The State Duma has approved a new tax bill that mandates industrial Bitcoin miners to pay taxes on their revenues, which is now moving through the legislative process for final approval.
Approval of the Crypto Tax Bill
The State Duma, Russia’s lower house of parliament, voted favorably on the government’s proposed amendments to the Russian Tax Code, marking a pivotal moment for the crypto sector in the country. This approval occurred during the bill’s second and third readings, as reported by Komsomolskaya Pravda.
Following this legislative approval, the bill will proceed to the Russian Senate. Observers anticipate that President Vladimir Putin will promptly sign it into law, given the swift actions taken by the Duma in recent days.
Key Tax Provisions
Under the new law, crypto miners will be required to pay a flat tax rate of 13% on earnings up to 2.4 million rubles (approximately $21,210) annually. For those whose profits exceed this threshold, the tax rate rises to 15%. The legislation’s detailed tax structure aims to formalize the crypto mining landscape and ensure compliance among operators.
This bill is groundbreaking beyond taxation; it officially classifies cryptocurrency as a form of “property” for the first time in Russia. Previously, the treatment of cryptocurrencies in Russian courts was ambiguous, as judges faced challenges in categorizing blockchain-based assets. Additionally, the bill stipulates that miners will be exempt from paying value-added tax (VAT) on the mining and sale of cryptocurrencies on exchanges.
Compliance and Reporting Obligations
To enhance regulatory oversight, the bill mandates that miners report their operations to the Federal Tax Service (FTS). Noncompliance can result in fines of up to 40,000 rubles (around $354), emphasizing the importance of adherence to the new regulatory framework.
As Russia navigates through these legislative shifts, the backdrop of international sanctions and economic pressures, such as the recent sanctions against Russian banks, continues to affect the national economy, including the cryptocurrency market.
A Rapidly Evolving Mining Landscape
The pace at which Russia’s crypto mining regulations are evolving has accelerated since Putin enacted the first crypto mining legalization law in August 2023, which took effect on November 1. This initial law has been followed by additional government measures, such as temporary bans on mining in regions facing winter energy shortages.
Recently, the FTS highlighted that approximately 150 firms have already applied for operating permits, with expectations of a surge in applications as the industry adapts to the new regulatory environment.
Increased Demand for Mining Hardware
Recent reports indicate a significant rise in demand for cryptocurrency mining hardware within Russia. As interest in mining surges, purchases have skyrocketed from about 30 rigs per week earlier in the year to approximately 600 rigs weekly as of November. This spike in demand has also led to price increases of about 10% to 15% for mining equipment, as stated by the Moscow-based mining hardware firm Mining Group.
According to Alexander Peresichan, CEO of Tehnobit, the profitability of Bitcoin mining remains robust in Russia. Following the Bitcoin halving event in spring 2024, mining costs rose, but certain regions like Irkutsk—known as Russia’s Bitcoin mining capital—offer slightly lower prices. However, illegal mining activities are reportedly straining the local power infrastructure.
Conclusion
The new crypto tax legislation marks a significant step for Russia in regulating its burgeoning cryptocurrency industry. With the formal recognition of crypto as property and the establishment of tax obligations, the government aims to create a structured environment for miners. As Russia continues to navigate its domestic and international challenges, the cryptocurrency sector will likely play a critical role in the economy.