March 28, 2024

Mining Law and Cryptocurrency Mining Taxes in Russia

Mining Law and Cryptocurrency Mining Taxes in Russia

A large number of people are concerned about the question of whether there is criminal liability for the use ofBitcoin or other cryptocurrencies? Indeed, according to the laws of most countries of the world, the illegal circulation of banknotes is prohibited and may entail criminal and administrative liability.

You can immediately say that the use ofCryptocurrencies are not yet illegal because they are not money, but are a property asset that has some value. There are precedents in the Russian legal proceedings in which the status of cryptocurrencies was determined in this way. The determination of the status of cryptocurrency assets was needed in the course of resolving a dispute that arose during the trial when considering bankruptcy proceedings.

The Moscow Arbitration Court acceptedattention is paid not only to the defendant’s salary, but also to the bitcoins he has, stored on the cryptocurrency wallet Blockchain.info. The court's decision was motivated by the fact that in the Russian Federation there is no final list of objects of civil rights. According to the Civil Code, this list includes, among other things, other property. There is no comprehensive definition of this concept in laws and regulations, therefore, according to the court, it is necessary to take into account modern realities, as well as the development of technologies that allow this concept to be interpreted in a broad sense. Based on this, cryptocurrency was included in the list of other property by court order.

Currently, Russian lawmakers are working on the adoption of legislation that will assign cryptocurrency the status of property.

Let's take a closer look at the questions about whether it is legal to mine bitcoins and other cryptocurrencies in Russia, how to pay taxes from mining, and whether the prospect of banning cryptocurrencies in the Russian Federation is real.

Criminal liability for mining in Russia, the main regulatory legal acts

Mining Law and Cryptocurrency Mining Taxes in Russia

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There is currently no criminal liability for cryptocurrency mining.The legal field still lacksdefinition of this concept, which leads to its various, sometimes extravagant, interpretations by law enforcement agencies, “who want to fine craftsmen who produce money from ether, or ether from money invested in equipment.”

Based on existing precedentsrecognition of cryptocurrencies as property, then accusations of illegal production of funds are groundless. It is necessary to understand that, if necessary, legal acts prohibiting the laundering of proceeds from crime, as well as articles related to the financing of terrorism, may be applied against the owner of cryptocurrencies.Statements about the criminalization of the shadow circulation of cryptocurrencies and that mining will be banned in Russia.

Mining Man Theoreticallymay be held liable for engaging in illegal business activities, but here in the legislation of the Russian Federation and many other countries there are many gaps that the new law on digital financial assets should partially fill.

The draft of this necessary law willpresented for discussion by the society in September 2020 and will subsequently introduce into the legal field such concepts as cryptocurrency, tokens, mining and others related to the cryptocurrency market. In May of this year, the draft passed its first reading in the State Duma and is scheduled for consideration in the second reading. The original version of the bill can be found online at https://www.minfin.ru/ru/document/?id_4=121810. According to senior Russian officials, it should be finally adopted during the autumn session. After the adoption of this law, mining in Russia will become an official occupation.

The adoption of the law on mining, can it be banned?

Mining Law and Cryptocurrency Mining Taxes in Russia

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According to statements by representatives of the State Duma, in Russia there is no question of a ban on mining and the introduction of a special tax regime for them and for crypto traders.

The draft law on digital assets contains the following interesting provisions for miners:

  • Such concepts as cryptocurrency, tokens, digital transactions, records and other terms related to the cryptocurrency market are introduced into the legal field;
  • The features of the issue of tokens, the features of the circulation of digital assets are discussed.

The original version of the document containsvery little information regarding mining, but it should expand after refinement. The initial version of the law determines that mining is an activity aimed at creating cryptocurrency. In this case, two categories of miners are introduced:

  • Homemadethat do not exceed energy limits set by the government.
  • Professionalwho must legalize their activities by opening a company or registering the status of an individual entrepreneur.

The content of these provisions clearly answersthe question of whether mining is legal in the Russian Federation and includes the majority of miners in the ranks of entrepreneurs, exempting those who are engaged in mining at home on a personal computer without exceeding electricity consumption limits.

Cashing out bitcoins and other cryptocurrencies

Mining Law and Cryptocurrency Mining Taxes in Russia

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According to the draft law, it is provided thatowners of digital assets (cryptocurrencies and tokens) can exchange them for rubles or foreign currencies. This introduces cashing of cryptocurrencies into the legal field. At the same time, the mechanism of taxation of such an exchange is not entirely clear, but, nevertheless, this is a step forward.

Webmoneyand a number of other payment networks have enabled digitalBitcoin currency to the list of supported assets and added a separate wallet for crypto coins. And this means that anyone, after registering in the system, can exchange fiat money for virtual money in a completely legal way.

Terminalsforex brokersThey also began to use top cryptocurrencies as a trading instrument. Clients who have opened an account on the exchange can earn money from fluctuations in the exchange rate of Bitcoin, Litecoin or Ethereum.

Of course, in payment system wallets and depositsForex restrictions are set that do not allow to fully assess the possibilities of cryptofinance. But, they are connected with the peculiarities of the work of companies, and not with changes in legislation.

And yet the situation is uncertain and 2020could be a turning point. Most recently, people’s representatives put on the State Duma’s agenda the issue of introducing administrative and criminal liability for violations in the field of digital financial assets and digital currencies. This information is available on the RBC portal, link https://www.rbc.ru/finances/21/05/2020/5ec54f6a9a7947448e60319a.

Bills amending the Code of Administrative Offenses, Criminal Code andArticle 151 of the CPC was sent to the relevant ministry. If these two legislative acts are agreed, then private traders may be fined half a million rubles for illegal circulation of cryptocurrencies. If a person holds a certain position in state or commercial structures, then the fine increases to 1 million, and for legal entities to 2 million rubles.

If violations of the rules of transactions were committed when paying with cryptocurrency for goods and services, then virtual money will be arrested and a fines will be imposed on the perpetrator.

  • Individuals - 20,000/200,000 rubles.
  • Officials - 50,000/400,000 rubles.
  • Legal entities - 100,000/1,000,000 rubles.

In the event of major damage to citizens,organizations or the state, as well as in the case of buying cryptocurrency for paper money, or using bank accounts, a criminal case can be brought against the violator. The maximum sentence of imprisonment is 5 years.

There is another bill reckoningcryptocurrencies to the category of property and completely prohibiting their release and circulation in the Russian Federation. You can use only digital assets, which are a direct analogue of a bond, the right to participate in capital or a debt receipt. In blockchain ecosystems, they are called digital markers and are usually issued at the ICO stage.

President of RACIBYuri Pripachkinhas already stated that the adoption of these bills is tantamount to a complete ban on cryptocurrency in Russia. We will have to sell off mining farms and go abroad to exchange digital coins.

The fact of sending documents to the Ministry of Economic Development was confirmed by the chairman of the State Duma Committee on the Financial MarketAnatoly Aksakovbut he noted that the final version has not yet been agreed. Nevertheless, it is already obvious that Russian politicians and financiers do not want to recognize cryptocurrency as a legal financial instrument.

About the reasons for introducing such strict methodsone can only guess. Perhaps they are ready to follow in the footsteps of China and have seriously begun to develop crypto ruble, but so far this is only an assumption. There are states, for example, Nepal, which have fully or partially banned digital currencies on their territory and are not at all going to (at least for now) refuse paper bills.

Cryptocurrency mining taxation in Russia, how to pay it

Mining Law and Cryptocurrency Mining Taxes in Russia

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Mining entitiesMost likely, Russia will be paid a tax to the state in accordance with the form of their business activity, and individuals will have to pay income tax in the amount of 13%. Persons who do not exceed the established limits for electricity consumption will not be taxed.

It is possible that tax incentives will be applied to miners similar to Belarus, where there are no taxes on mining, or with reduced rates at the level of 3-5%.

When paying taxes should be usedtechniques to minimize them. Payments should take into account the expenses of miners for the purchase of equipment, electricity, depreciation of equipment, rent and maintenance, which in the first years of use can significantly exceed the income from mining. How this will be taken into account during taxation, as well as the question of how mining revenues will be calculated, remain open for now.

There are many ways to cash out.cryptocurrencies that are difficult to control. Linking to one user's cryptocurrency wallet will be ineffective due to the ability to reconfigure some of the capacities to another wallet or other cryptocurrency. It can always be motivated by a decision to increase mining income in this way.

In a normal society, such laws are passedin order to promote innovative development, and in countries with a distorted worldview, laws are passed in order to restrict people and get bribes from them to keep a huge number of bureaucrats who parasitize society. What path the Russian legislators will take, time will tell. Recent events have not added optimism.

Miner control and electricity tariffs

Mining Law and Cryptocurrency Mining Taxes in Russia

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Based on the division of miners into two categories,with a small scale of mining, taxes are not provided. To get into the category of professional miners, it is necessary to take into account “limits established by the government”.

Currently, in every administrativeunit there are social consumption norms that overlap even without mining. A small rig of several video cards consumes many times more than any social standard. Therefore, the question of the standards that entail falling into the category of professional miners is very important. If social norms are used, this will oblige the majority of even home miners to receive the status of an individual entrepreneur.

Transition totariffs for households with electric stoves and electric heating, but this still will not make it possible to avoid registration with any serious capacities.

The best consumption rates for miners inAt present, they exist in the Russian regions with the cheapest electricity tariffs, which in the future contribute to the transformation of these places into industrial mining parks. But with home mining, not a single Russian tariff will allow even a miner with one working rig to invest in it.

Crowdfunding Act and ICO

Mining Law and Cryptocurrency Mining Taxes in Russia

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In addition to the law on digital assets, in the State Dumathe draft law on alternative methods of attracting investments (crowdfunding) is undergoing a second reading, which will allow lawfully attracting investments in innovative ways.

This law must be adopted simultaneously withthe law on digital assets, since it is essentially related to it. In developed countries, such laws have long existed, for example, France adopted such a law back in 2014.

This law regulates the procedure for conducting ICOs and has the following features:

  • the terms crowdfunding, tokens of the investment project are introduced;
  • the procedure for organizing crowdfunding, requirements for the rules of the investment platform, investment methods, among which the purchase of tokens, is also determined;
  • The property rights of the owner of the tokens of the investment project are determined, the boundary sizes of investments
  • requirements for operators of investment platforms and areas of responsibility are regulated, it is indicated thatthe operator of the investment platform is not responsible for the obligations of the person attracting investments;
  • requirements for regulation and supervision are defined, according to which control over compliance with the requirements of the law is assigned to the Bank of Russia;
  • on the Internet, the Bank of Russia will maintain an open register of investment platform operators;

RAKIB - what it does and what you need to know

Mining Law and Cryptocurrency Mining Taxes in Russia

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Russian Association of Crypto Industry and Blockchain(RACIB, website https://racib.com), founded in 2017, is the most important community of enthusiasts promoting innovative blockchain technologies, cryptocurrencies and ICOs.

According to the latest initiatives of the RACIB, together withCryptouniverse company plans to create a unified Russian mining pool, which will provide miners with the status of self-employed persons and will give the opportunity to mine bitcoins and other cryptocurrencies legally.

Community Suggests Lightweight Algorithmtaxation on cryptocurrency mining in Russia in the amount of 3-5% of the amount received when exchanging the received cryptocurrency for rubles. This will lead to more than 350 thousand people in the legal field, increase the level of security when working with cryptocurrencies and bring additional funds to the state budget of Russia due to the taxation of cryptocurrency mining.

In addition, the RACIB is preparing an initiativeregarding the certification of miners, which will increase the safety of this activity by issuing appropriate licenses, compliance with the standards for mining premises to meet the requirements of electrical and fire safety.

Positive legislative response to the question aboutwhether it is possible to engage in mining in Russia contributes to Russia's exit from the gray zone, in which there is no legal regulation of the cryptocurrency market. Legalization of mining in Russia will allow to bring the country to a new, more progressive level, as well as provide an impetus for a more dynamic development of innovative projects.

The introduction of cryptocurrencies and mining in the legal field will provide a higher level of security for such activities and should contribute to the development of many related industries, including:

  • development of a communication system and power supply;
  • the emergence of diversified electricity tariffs;
  • development of industrial parks;
  • the emergence of lines for the production of specialized ventilation systems, cases and containers for equipment;
  • the emergence of a greater number of programmers and specialists in the field of blockchain technologies, as well as many other useful functions.

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