Russia: Cryptocurrency mining will be conditionally legalized

On July 5, the Central Bank of Russia (CBR) said it would agree to legalize cryptocurrency mining, provided that the output mined by miners in Russia can only be converted into fiat currency outside Russia. The key is to avoid creating incentives for the subsequent use of cryptocurrencies in domestic payments.

Russia’s central bank has been a hardliner in discussions about the future of cryptocurrencies in Russia, proposing a blanket ban on most related activities, including mining operations, earlier this year. However, in the face of opposition from other government agencies and having to deal with financial constraints imposed by the war in Ukraine, its stance began to change.

Kirill Pronin, head of the financial technology department at the Central Bank of Russia (CBR), expressed his views on mining at the St. Petersburg International Legal Forum on Wednesday, June 29. At a conference devoted to cryptocurrencies, Pronin revealed that the CBR does not take a hard line on mining as it does on legalization of cryptocurrencies in general: “While we have been vocal about banning transactions in cryptocurrencies, the Discussions on legalization of mines are possible.” However, Pronin noted that only certain circumstances would make this discussion possible. He insisted that the assets obtained from mining should be strictly sold abroad in exchange for fiat currency: “Ultimately, we have to say that there should be an export for these mining services, and the mining business should not lead to the accumulation of cryptocurrencies in our country, so no There is an incentive to use internal payments further.”

Ivan Chebeskov, head of the Financial Policy Department of the Russian Ministry of Finance, noted that some large cryptocurrency mining companies based in the Russian Federation have also been forced to deal with foreign restrictions when withdrawing funds. He suggested that Russia may have to build its own exchange infrastructure to provide liquidity to the industry.

Additionally, crypto mining legislation is also in the works. It is reported that on April 29, the draft of the new "Russian Federation Mining Law" has been submitted to the Russian Duma. The bill aims to free cryptocurrency-related industries from Russia’s “grey” economy. The authors of the bill describe the minting of digital currency as an activity that uses information infrastructure and equipment located in the Russian Federation, resulting in the creation of digital currency. They also introduced legal definitions of digital currency circulation, mining pools and operator mining facilities. The law provides for the creation of a special register for cryptocurrency miners, which will be administered by an authorized federal agency. Individuals involved in bitcoin mining will be able to register as self-employed or self-employed individuals if their electricity consumption exceeds certain limits set by the government. Russian miners will be required to keep records of minted cryptocurrencies, their types, any contracts with other entities and coin buyers, exchange operators, payment systems and banks.

Andrey Lugovoy, a member of the Russian Duma’s cryptocurrency legislative and regulatory working group, said that due to climatic conditions, excess electricity and low costs, Russia has the potential to become the world’s largest cryptocurrency mining country. According to data from the Cambridge Centre for Alternative Finance (CCAF), as of January 2022, Russia ranks fifth with a market share of 4.7% of the total Bitcoin network computing power.

As of now, cryptocurrencies have received a great deal of acceptance in Russia. In June, Elvira Nabiullina, the governor of Russia’s central bank, said that cryptocurrencies can be used for cross-border or international payments, but not domestic ones. The central bank governor believes that digital assets must comply with all requirements and policies established to protect investors. Therefore, all assets listed on exchanges must comply with disclosure requirements.

source：golden finance