The Russian government might approve the bills to legalize crypto mining by the end of this week. The bills stipulate that the crypto miners in the country should comply with the anti-money laundering legislation of the country.
The bill is now under the consideration of the upper house of the Russian parliament. It will come into force after the Russian president gives his consent to pass the bill by signing it. The laws will come into effect on September 1, 2024.
The main content of the bill is that Russia’s national agency to counter money laundering activities, Rosfinmonitoring, is given the right to track crypto miners who indulge in any suspicious transactions.
The bill also has provisions to ban the crypto exchanges, which are currently outside the regulatory sandbox. It also has provisions to regulate the Russian firms which use cryptocurrencies for cross-border payments.
The Russian president is all cheers for the cryptocurrency regulation bills. He has called for fast-tracking the implementation of the laws concerning crypto mining.
The need to regulate the crypto mining sector in Russia has become more important now as the industry has boomed significantly despite its illegal status. The fate of the private, non-industrial miners was uncertain till now.
The allegations that these miners are causing power shortages in the region with excessive consumption have made the government consider allowing the power companies to prosecute the illegal miners.
There are also concerns about the taxation rules that need to be implemented on crypto miners. Since the sector is highly unregulated and substantial data about the revenue made is not unavailable, crypto miners are not adequately taxed.
The proposed bill is expected to have provisions to regulate the taxation of crypto assets and help the Russian government earn its due in terms of tax revenue.
Alternatively, a more lenient approach to allow the miners to work from their homes as long as they do not exceed the threshold of energy consumption has also been under consideration by the government. Few people also anticipate that the government might postpone the regulatory decisions regarding private miners to a future session.
A definite picture of the government’s decisions will emerge once the bill under consideration is passed by the legislative authorities.
The proposed bill has been welcomed by the industrial miners as it will boost their supremacy in the industry. If the private miners are regulated or banned, the industrial miners will get more opportunities to do their work.
They can also counter the general allegations regarding crypto mining and its link with money laundering activities.
More About the Russian Crypto Mining Industry
Russia is a major force in crypto mining. Even though the industry is not yet legalized in Russia, many players in the market make use of the low-cost availability of power in the country to aid their mining activities. Russia is the third largest economy in the world in terms of crypto mining facilities.
Mining companies are found more in the Irkutsk region of the country as this electricity cost is negligible here.
Private miners operate from their homes or other establishments and are alleged to use the energy meant for household consumption for mining activities. This is of concern because such unregulated use of electricity will cause an electricity shortage in the region, affecting other industries.
Crypto mining infrastructure uses 120 to 240 billion kilowatt-hours per year in Russia alone, which is far higher than the total energy consumed by various data centers all over the world, according to a report by the Canada-based Just Energy.
Cryptocurrencies are used by Russians living abroad to transfer money to their home state by bypassing the Western rules of money transfer.
In the wake of the Russia-Ukraine war, the war financing and buying of armories using regular currency may cause the international regulatory rules to affect the seamless nature of the transactions.
So many entities are increasingly using cryptocurrencies to finance the war as the industry does not fall under the ambit of international regulations.
The Bottom Line
The proposed legislation, with its seemingly well-thought-out provisions, is the need of the hour in a country like Russia where the abundance of crypto miners, if unregulated, will cause huge ramifications in the state’s financial and energy sectors.
