Cryptocurrency mining should be recognized as an entrepreneurial activity by Russian law and taxed accordingly, noted representatives of the main ministries in Moscow and Parliament. Officials believe that the regulatory move will benefit both the state and the cryptocurrency industry.
The Russian government will collect millions of dollars in taxes after legalizing cryptocurrency mining
While the Digital Financial Assets Act – which came into force in January of this year – regulates some crypto-related activities such as “issuing digital currency,” it does not explicitly mention cryptocurrency mining. The sector remains unregulated, as the Russian Finance Ministry recently acknowledged in comments to the local press. Industry is expanding in Russia, which is rich in energy resources and ranks first among global destinations in terms of global retail.
According to the Ministry of Economic Development, Izvestia wrote in an article, mining should be strictly regulated as an entrepreneurial activity as fits the legal definition provided in the Civil Code. She stressed that this would allow the government to tax miners’ revenues and increase budget revenues. Alexey Minayev, Deputy Director of the Ministry’s Digital Economy Development Department, told the Russian daily:
This is exactly the area where the state can benefit in the form of taxes, people can ration their income, and big companies are becoming more and more interested in this.
Valery Petrov, Vice President of Market Development and Regulation at the Russian Association for Crypto Economy, Artificial Intelligence and Blockchain (Racib), noted that miners rarely return minted cryptocurrency proceeds to Russia as they find it difficult to prove that the funds were obtained legally.
Annual revenue from Bitcoin (BTC) mining alone has been estimated at $19.7 billion, with Russia accounting for about 12% of the total amount, or $2.4 billion. Petrov claims that the Russian Federation has lost millions of dollars in recent years due to the government’s failure to regulate and tax business.
The idea of recognizing mining as an entrepreneurial activity has won support from the Department of Energy, which believes this will allow authorities to distinguish between electricity consumption for private and business use. The move was also supported by the State Duma, the lower house of parliament, where the head of the important Financial Market Committee, Anatoly Aksakov, called for such a solution in September.
While he admitted that mining is not prohibited yet, the legislator indicated that the taxes imposed on it are not yet clear. Aksakov also suggested that it would be worth considering an increase in electricity tariffs for crypto miners, as they are currently purchasing energy at regular rates. The MP pointed out that most entities in the sector do not pay any taxes at the moment, and added that large mining companies would like it to be legalized.
In keeping with its tough stance on decentralized digital money, the Bank of Russia has stated that it does not support any initiatives promoting the emergence of “alternative cash,” a term it often uses to describe cryptocurrencies. The Central Bank opposes its legalization in the country and maintains that the ruble is the only legal currency under Russian law. However, the Ministry of Finance insists that the legal status of cryptocurrency mining must be determined as part of the rules regarding cryptocurrency trading.
Do you think Russia will adopt business-friendly regulations for the growing cryptocurrency mining industry? Share your predictions in the comments section below.
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