RSpectr. Crypto farms will be brought to light

23.11.2022

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How Russian Lawmakers Propose Regulating Mining

A bill on the mining and sale of digital currencies has been submitted to State Duma. Experts interviewed by RSpectr note that the regulatory changes will increase tax fees by removing cryptocurrency mining from the gray zone. At the same time, they point out that the document contains a number of controversial provisions and hope for further improvement of regulation in this area.

DEFINE DIRECTIONS

The bill on the mining and sale of cryptocurrencies was submitted to State Duma by a group of deputies from different factions on November 18. Amendments to Digital Financial Assets Act introduce the definitions of "digital currency mining" and "mining pool". Requirements for the activities of individuals and legal entities engaged in mining digital currency, including participants in the mining pool, will be established by Government of the Russian Federation in coordination with Central Bank, and control and supervision of compliance with the requirements will be carried out by the federal executive body authorized by Government of the Russian Federation.

The submitted document leaves miners with two ways to sell the extracted cryptocurrency:

• through foreign systems without using Russian infrastructure and without complying with the law on currency regulation;
• through a platform that will be created in the Russian Federation under the experimental legal regime (ELR).

In both cases, you will need to notify Federal Tax Service about transactions. The bill also introduces a ban on advertising (or offering in any other form) of digital currencies, but makes an exception for mining digital currency.

If adopted, the law will come into force on January 1, 2023.

Based on existing estimates,

Such data is provided by the analyst of FG Finam Leonid Delitsyn. If the price of bitcoin is not lower than today's level, the maximum estimate of contributions to the budget will be 7 billion rubles a year, he told RSpectr.

As the co-author of the amendments, Deputy Chairman of State Duma Committee on Information Policy Anton Gorelkin noted in his Telegram channel, the bill was developed taking into account the positions of Ministry of Finance and Central Bank.

The state receives tax revenues, and market participants receive legal guarantees, he said.

Anton Gorelkin, State Duma:

We expect that with the adoption of the law, law enforcement practice will begin to take shape, which will determine the direction of further comprehensive regulation of issues related to the issuance and circulation of digital currencies. But it is already clear that the main vectors should be the development of blockchain technologies and the protection of the rights of citizens who use them.

Ministry of Finance of Russia took part in the preparation of the draft law, the press service of the ministry told RSpectr. The document will allow you to legally carry out mining, while it will be possible to declare the income received from such activities and pay taxes on it. "It is assumed that the requirements for participants in mining activities, as well as the definition of a control and supervisory body, will be regulated at the level of an act of the government of the Russian Federation, which will be prepared after the adoption of the bill," the press service of Ministry of Finance noted.

The Ministry added that Ministry of Finance is already developing an ELR.

"At the same time, an important fact is the possibility of using cryptocurrencies, including in the framework of cross – border settlements," Ministry of Finance notes.

Russia is considered one of the largest mining centers, probably one of the top three, emphasizes Leonid Delitsyn.

According to him,

In the current external economic conditions, digital currencies extracted by Russian miners can be used for making settlements under foreign trade contracts, Igor Runets believes. "According to expert estimates, Russian industrial miners can provide liquidity of about 240 billion rubles a year at the first stage," he said.

CALL A SPADE A SPADE

The mining community was very much waiting for this bill, Artem Eremin, development manager of the Chilkoot by 3Logic Group mining equipment distributor, told RSpectr. "Until now, mining as an activity did not exist, it was an undivided part of cloud computing. With the adoption of the law, it will be possible to call a spade a spade, " he said.

In fact, the bill does not allow or prohibit anything new, only eliminates a legal incident that arose due to the lack of necessary terms in the legislation, says Ernest Rayevsky, managing partner of GetMiner. "This will protect the rights of market participants and help resolve disputes," he told RSpectr.

Maxim Fedorov, Investment Adviser at Fontvielle IC, points out in an interview with RSpectr that the lack of legislative regulation creates room for fraudsters and other negative consequences.

Given the reality that huge mining farms have been successfully operating in the Russian Federation for a long time, it is in the interests of the state to take this business out of the gray zone, tax it, regulate it and make it more transparent, Venera Shaidullina, founder of the Initiator digital platform for developing and promoting legislative initiatives, emphasizes in a conversation with RSpectr.

At the same time, she notes that the proposed changes leave many questions related to practical implementation. According to the expert, more regulations are needed that regulate mining in more detail.

GO BEYOND ELR

Igor Runets, founder and CEO of BitRiver, called the bill balanced, taking into account the growth potential of mining and the demand for cryptocurrencies in Russia.

Igor Runets, BitRiver:

In particular, we positively assess the possibility of buying and selling cryptocurrencies on the territory of the Russian Federation under the ELR, which will allow Russia to receive revenue, carry out bank financing of investment projects and avoid blocking transactions due to the actions of unfriendly countries.

However, the expert believes that

"It is controversial to try to legalize mining as the production of cryptocurrency, while prohibiting its circulation in the country. I hope that lifting the ban will be the next big step that lawmakers will take", - Venera Shaidullina agrees.

Alexandra Orekhovich, Director of Legal Initiatives at the Internet Initiatives Development Foundation (IIDF), also points out in a comment for RSpectr that, according to the draft law, digital currency mined in Russia can only be alienated in foreign markets. The expert emphasizes that

This, in turn, will help to leave the profit from this activity in foreign jurisdictions.

Market participants are determined to actively participate in the process of preparing amendments to the draft law, Igor Runets is sure. In particular, it is necessary to detail the actions of miners who will produce cryptocurrency, as well as individuals who will own it and exchange it through the Russian platform. In addition, the weighted system of taxation of miners ' profits has yet to be finalized.

This opinion of the executive Director of the Association of Developers and Users of Blockchain Technology and Artificial Intelligence Systems (RACIB) Alexander Brazhnikov was conveyed to RSpectr by the press service of the association.

LEAVE SCAMMERS WITHOUT ADS

Some experts criticized the provision of the document prohibiting advertising (or offering in one form or another) of digital currencies, with the exception of cryptocurrency mining.

According to Vasily Kudrin, Director of Lybrion, which he shared with RSpectr, this all-encompassing wording, in fact, can prohibit any activity related at least indirectly to the crypto industry.

Alexander Brazhnikov also drew attention to this. "A ban on advertising <...> digital currencies is written in black and white. When the law on digital financial assets was adopted in 2020, such words were already there, but the entire community rose up in a common front against the ban on cryptocurrencies in the country. And now, at a difficult time for the country, we have decided to re-ban cryptocurrencies-through amendments to the DFA Law, " the expert said.

Anton Gorelkin specifically explained this situation in his Telegram channel. According to the parliamentarian, a fragment of the bill, which refers to the ban on advertising cryptocurrencies and operations with them, was misinterpreted as a ban on cryptocurrencies in general.

"Yes, we want sites to refuse such advertisers legally – and in some countries this is already practiced. And so that fraudsters do not have the opportunity to place hidden advertising of their schemes, the wording "advertising and (or) an offer in another form" is used," he said.

One of the reasons for banning advertising, according to Ernest Rayevsky, is the regular appearance of fraudulent financial products. That is why additional measures are being introduced to protect members of the crypto community.

In fact, advertising of cryptocurrencies has long been banned at the level of decisions of large Internet companies, explains Venera Shaidullina.

Venera Shaidullina, "Initiator":

Search engines, social networks and other platforms are afraid of being involved in legal proceedings as accomplices in large-scale fraud cases. Therefore, the ban on advertising cryptocurrencies is more likely a formalization of the actual existing norm than a legislative innovation.

Marina Novikova

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Source: RSpectr (23.11.2022)