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In a significant shift, Russia has officially legalized cryptocurrency mining with a new law signed by President Vladimir Putin. This legislation not only legitimizes mining but also establishes a strict regulatory framework aimed at controlling the burgeoning industry. By introducing clear guidelines for participation, oversight, and taxation, Russia is positioning itself to “seize the moment” and harness the economic potential of digital assets while maintaining stringent control over their use.
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Legal Framework and Registration Requirements
The new law signed recently will become effective in 10 days after its publication/signing. Only registered legal entities and individual entrepreneurs are allowed to mine cryptocurrencies. Individuals who engage in mining without registering must adhere to specific government-set energy consumption limits.
Regulatory Oversight
The law imposes strict oversight on mining activities. Miners must report their earnings and wallet addresses to an authorized governmental body, which will monitor these activities to prevent illegal practices like money laundering.
- Rosfinmonitoring, officially known as the Federal Financial Monitoring Service, Russia's financial watchdog, will maintain records of users suspected of involvement in illicit activities.
- The Bank of Russia will also have significant control over mining operations, including the authority to restrict transactions if they are deemed a threat to financial stability.
Participation Restrictions
- Not everyone is allowed to participate in mining. The law prohibits individuals with criminal records for economic crimes, extremism, or those on specific government lists from engaging in mining activities.
- This restriction also extends to legal entities that do not meet the required standards of business integrity.
- The government has the authority to restrict mining in certain regions to manage energy consumption more effectively.
Ban on Cryptocurrency Advertising
To protect the public from the potential risks associated with cryptocurrency investments, the new law bans the advertisement of cryptocurrencies and related services. This is part of a broader strategy to prevent unregulated promotion of high-risk financial products to the general public.
Experimental Cross-Border Payments
The new law introduces an experimental legal framework for cross-border crypto payments. The Central Bank of Russia will authorize selected companies to conduct cross-border settlements and exchange trading in cryptocurrencies. This move signals a cautious but notable shift in Russia’s approach to using digital assets for international transactions, especially in the face of international sanctions.
Taxation of Mined Cryptocurrencies
Under the new law, profits from cryptocurrency mining are subject to taxation. Miners, whether individuals or legal entities, are required to report their income from mining activities, and these earnings will be taxed in accordance with Russian tax laws.
The prohibition on advertising, along with the stringent participation criteria, reflects ongoing concerns about the risks associated with digital assets. The new law marks a significant departure from past policies. By legalizing and regulating mining, the government is acknowledging the economic potential of cryptocurrencies.
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