Russia Legalizes Crypto Mining, Unlocking International Payment Opportunities

Last Updated on August 1, 2024 by SPN Editor

On Tuesday, Russia enacted two laws that legalize Crypto mining and pave the way for the central bank to use cryptocurrency for international payments.

New Law on Crypto Mining

Russia’s State Duma has approved a comprehensive law regulating crypto mining and digital asset circulation. Initially presented by Anatoly Aksakov in November 2022, the law faced several delays but was finalized in April 2024 and passed its first reading on July 24, 2024.

Key requirements for cryptocurrency miners include:

• Only registered companies and individual entrepreneurs in Russia, listed in the register of mining infrastructure operators, are allowed to mine.
• Home miners are exempt from registration if they stay within government-set energy consumption limits.
• Individuals with criminal records for economic crimes are prohibited from Cryptocurrency mining.
• The government reserves the right to ban mining in specific regions.
• Miners must report their earnings and wallet addresses to an authorized body.
• Non-compliant miners risk disconnection from the power grid and legal consequences.

An initial provision banning the use and sale of mined cryptocurrency within Russia was removed from the final version of the law.

Trading in Foreign Digital Financial Assets (DFA)

Russian platforms can now trade in foreign digital financial assets under the oversight of the Central Bank, which has the authority to ban specific coins if they threaten financial stability. This development marks a significant step toward the broader adoption of digital currencies in Russia.

Increased Interest in Crypto Mining

Improved mining economics, driven by rising Bitcoin prices, have created favorable conditions for Crypto mining in Russia. Despite international sanctions, Bitcoin mining machines are still entering the country, contributing to a thriving industry.

Legalization of Crypto mining Russia’s lower house of parliament, the State Duma, has approved crypto mining for businesses and entrepreneurs. These miners must register with relevant agencies for tracking. Individuals can mine without registration if they stay within government-set energy limits. The government can also ban mining in certain regions.

Reporting Requirements and Security Miners in Russia now have to report their activities to the local financial monitoring service and provide their wallet addresses to security services. These rules aim to increase transparency and security in the crypto industry.

Cross-Border Payments In September, a new bill will allow Russia’s central bank to create an experimental infrastructure for using cryptocurrencies in cross-border payments. Currently, digital currency payments are banned within Russia, but this new law could enable international crypto transactions. This is especially important as global sanctions have isolated Russian companies from the dollar system.

Using Cryptocurrencies to Circumvent Sanctions Anton Gorelkin, deputy head of the committee on information policy and co-author of the crypto bill, stated that Russia sees cryptocurrencies as a tool to bypass sanctions. With sanctions impacting the economy, Russia is looking for alternative financial transaction methods.

Putin’s View Russian President Vladimir Putin is optimistic about digital currencies. He recently called them “a very dynamic and promising direction of the modern economy” and emphasized the importance of setting up legal frameworks, developing infrastructure, and creating favorable conditions for digital assets.

Remaining Limitations Despite these positive steps, some restrictions still exist. The new law doesn’t lift the ban on cryptocurrency payments within Russia, and advertising for cryptocurrencies and related services is still prohibited. These restrictions limit the growth of the local crypto industry.

Electricity Shortages and Tariffs Recently, President Putin blamed crypto miners for electricity shortages in Buryatia and the Irkutsk region. To address this, Russia’s Ministry of Energy has proposed increasing tariffs for miners by five to ten times to balance energy demands.

As of November 1, 2024, Russia has fully legalized crypto mining. Various institutions, including the Bank of Russia, will oversee Crypto mining activities to ensure compliance and regulation.

In addition to legalizing mining, Russia has introduced an experimental regime granting the central bank the authority to allow selected companies to conduct cross-border settlements and exchange trading in digital currency. This move highlights Russia’s increasing interest in the crypto industry, despite facing global economic sanctions and regulatory challenges.

Russia’s dominance in Bitcoin hash rate is largely attributed to its cheap energy and cold climate, which create ideal conditions for efficient Crypto mining operations.