Crypto mining bill rejected

Crypto mining bill rejected

The government gave negative feedback on the document, deeming it superficial. Some of its provisions could take away the ruble’s status as the only Russian currency.

Crypto mining bill rejected

Crypto mining control measures postponed

The State Duma rejected the cryptocurrency mining bill that was presented in May 2022 by Anton Tkachev, Vladimir Plyakin, Grigory Shilkin, and Sardana Avksentieva, members of the New People faction.

The lawmakers were confident that it was time to take control of the industry. According to the explanatory note attached, Russians have set up more than 12 million cryptocurrency wallets and hold a total of approximately 10 trillion rubles. Russia is also one of the countries that lead the world in terms of crypto mining capacity, ranking third.

“Due to the non-existent industry regulation, all digital currency transactions and issuance are being carried out in the ‘grey area,’” deputies point out. “Against this background, citizens often get confronted with fraud without any tools to protect their rights and interests.”

The bill aimed at regulating activities that result in gaining digital currency, or crypto mining, in the territory of Russia.

The instrument also regulated relations arising in the crypto mining process, that is, creation and issuance of digital coins in the territory of Russia, and set out requirements for participants in crypto mining operations. For example, according to the deputies, if the electricity used by miners acting as natural persons exceeded the limits set by the government, citizens could be allowed to carry out activities only when registered as individual entrepreneurs or self-employed. It was proposed to tax crypto mining operators. 

Reasons for rejection 

According to the negative feedback that the State Duma Committee on Financial Market gave on the bill, it does not provide or imply any mechanisms for regulating digital currency circulation that excluded the possibility of using technologies to anonymize market participants’ data. Reviewers pointed out that the document lacked information on executive bodies that could be empowered to exert control and supervisory authority in matters concerning crypto mining.

The bill also provided for the use of cryptocurrencies as a payment method in Russia. That is prohibited by the Constitution. The monetary unit of Russia is the ruble, the issuance of other currencies prohibited.

It is worth noting that the bill presented in May is not the only crypto mining instrument proposed by the New People faction members. In April 2022, the lawmakers introduced the first version of the bill to the State Duma. It was an expanded version that, however, still lacked specificity. The document was later withdrawn.

Previously, in a conversation with CNews, Larisa Peshekhonova, chief consultant at the Distributed Ledger Technologies Center of St. Petersburg University, stressed that the bill was fragmentary and inadequate. According to her, the new version also contains only a few basic concepts and sets out the most generic requirements for parties in crypto mining legal relations.

Cryptocurrency’s troubled history in Russia 

In Russia, two rival coalitions with different approaches to crypto mining and cryptocurrencies were formed. The Russian Government believes that crypto mining should be legalized, whereas the Central Bank calls for a ban on crypto mining and views it as a threat, as cryptocurrencies could potentially be used for unlawful purposes. 

In December 2021, the regulator proposed a complete ban on cryptocurrency in Russia. Members of the State Duma made proposals to criminalize the use of bitcoin and other tokens. The Prosecutor General’s Office was even preparing a law on seizure and confiscation of Russian citizens’ cryptocurrency. The Central Bank proposed to use the digital ruble, which was non-existent at the time, instead of tokens. 

In January 2022, President of Russia Vladimir Putin stood up for cryptocurrencies and pointed out our country’s advantages in the crypto market. He encouraged the Government and the Central Bank to hold a set of discussions and come up with a joint solution.

In mid-April 2022, the Ministry of Finance finalized its cryptocurrency regulation bill, which covered crypto mining as well. The bill allows to accept cryptocurrencies as a payment and investment option, introduces crypto mining regulations and sets strict rules for exchange operators. However, market analysts noted that investors will most likely enter the black market or move to Western exchanges and no one will follow the rules.

It was in April 2022 as well that the Federal Taxation Service asked the Ministry of Finance to allow Russian companies to use cryptocurrency in international trade for payments for imports and other mutual settlements. The ministry generally supported the initiative but stated that it still required some refinement.

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