The Russian Senate has approved a draft law on crypto mining, meaning the landmark bill will now pass into law, pending the signature of President Vladimir Putin.
However, while some Russian Bitcoin (BTC) miners have welcomed the news, others are unsure about the development.
Russian Senate OKs Crypto Mining Bill – What Happens Next?
Per Vedomosti, the Federation Council approved the mining law, as well as another bill on “experimental foreign trade settlements” in cryptocurrency.
The mining law will allow both “legal entities” (industrial mining firms) and “sole proprietors” (individual miners) to mine crypto, provided they sign up for a national register.
Russia looks to bypass sanctions with new law allowing crypto payments in international trade. #crypto #sanctions #russiahttps://t.co/jtknNjT9iD
— Cryptonews.com (@cryptonews) July 31, 2024
News of the law will come as a huge relief to small-scale home-based miners. Individuals will be allowed to mine tokens provided they stay “within energy consumption limits set by the government.”
The bill also gives the government the right to impose bans on mining in “certain energy-deficient regions.”
Politicians expect Putin to sign off on the laws, bundled into a package of hundreds of other legal changes, early this week.
The media outlet and others noted that the law should “enter into force on September 1, 2024.”
Years of Uncertainty for Miners
Miners have been pleading with Moscow to legalize their industry for several years. But a political impasse has left them in a state of legal limbo.
However, intensive lobbying earlier this year and power shortages in certain Russian Bitcoin mining hotspots appear to have finally broken the deadlock.
Putin last month announced the “urgent need” for legislative regulation of cryptocurrency mining.
The Russian President noted that “uncontrolled growth” in electricity consumption for crypto mining “could lead to power shortages in certain regions.”
The State Duma responded by fast-tracking the bill through the house, with its second and third readings passed on a single day (July 30).
🏛️ The Russian parliament is set to review a crypto bill along with separate legislation on crypto mining on Tuesday.#Russia #Cryptohttps://t.co/QpV0tD4Lrx
— Cryptonews.com (@cryptonews) July 30, 2024
Not All Miners Happy?
The bill will provide legal definitions for terms such as “mining,” and “mining pools.” It will also trigger the creation of a second register of “mining infrastructure operators” under the jurisdiction of the Ministry of Digital Development.
Roskomnadzor, the Federal Service for Supervision of Communications, Information Technology, and Mass Media, will enforce compliance.
The law will also bar electrical power companies from directly launching their own crypto mining operations.
Miners will also be obliged to report all of their earnings to the tax body, and provide details of all their crypto wallet addresses.
Crucially, both Russian miners and mining pools must sell coins “without using Russian infrastructure.” This would force Russian miners to sell their coins on international crypto exchanges.
Sanctions a Concern?
Such a move may well see US and Western governments respond with sanctions on trading platforms that do business with Russian miners.
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— Bloomberg Markets (@markets) August 4, 2024
However, Russian media outlets claimed that “a national exchange infrastructure” could yet “be launched” in the nation in the months ahead.
Some miners called the move a “breakthrough,” with others labeling it a “historic event” or an “important government decision.”
Forklog reported that many miners were in two minds about the text of the draft law, noting:
“On the one hand, the emergence of a regulatory framework will allow [miners] to streamline their processes. But on the other hand, a number of clauses frighten businesses.”
The outlet quoted PR and Communications Director Mike Lvov of the mining specialist firm EMCD Tech as expressing concern about “registries” and “providing full reporting on cryptocurrency mining activities.” He said:
“It is not clear what will happen with this data. How will it be processed, and by whom? How will this information be used? There are no clear answers to these questions yet.”
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— Bloomberg Markets (@markets) August 3, 2024
Lawmakers in the Duma and the Russian Senate have claimed that the government and agencies will not interfere with miners except in “exceptional cases.”
But others appear unconvinced, and fear prohibitive energy price hikes. Fedor Ivanov, the Director of Analytics at the crypto security provider Shard, warned:
“First, the [new] regulation needs to [start] working. The industry must completely come out of the shadows, and sort out taxation-related issues. […] Only then can we start discussing raising tariffs.”
Ivanov added that “simply raising tariffs is an ill-considered idea.” The expert concluded that “pressure” on large industrial miners would “reduce Russia’s attractiveness” in the crypto sphere.
He also said that such measures would “not solve the problem of” home miners and “illegal connections” to power grids.
Most observers think that Bitcoin accounts for the majority of the Russian crypto mining mix, with over 90% of miners focusing their efforts on BTC.
