Crypto Mining Definition Removed From Russian Digital Currency Regulation Draft Bill

News and Analysis

The proposed law on digital assets in Russia will fail to clarify tax issues for miners after the lawmakers have removed the definition of crypto mining from the draft bill on digital currency regulation.

According to the chairman of the Russian State Duma Committee on Financial Markets Anatoly Aksakov, the definition is not needed since the deputies decided there’s no need to integrate cryptocurrency into the country’s economic system

“Earlier we had some thoughts on Bitcoin, on its integration into our economic system. But as we decided we don’t need them, these ambiguous Bitcoins, therefore we don’t need mining as well,” Aksakov is quoted by news agency Interfax.

If the law were to define crypto mining, it consequently would also need to define cryptocurrencies, Aksakov explained. He further added that it would make no sense to include mining in the regulation proposed by the government, and that it should be brought under the tax agency jurisdiction if needed.

The latter statement is in line with Aksakov’s earlier thoughts on the issue. In July this year he said that Mminers and holders of Bitcoin and other cryptocurrencies in Russia should be regulated under provisions of the existing Tax Code with no separate taxation schemes included.

Definitions for tokens and Initial Coin Offerings (ICO), as well as rules for crypto exchanges were included in the initial draft; however, it is not immediately clear whether they remain in the current version. The present draft law will proceed to the second of three readings in the State Duma.

The bill “On Digital Financial Assets” was first introduced in January by the Russian Ministry of Finance. In March, a group of deputies headed by Aksakov proposed a modified version that was aimed at protecting the rights of cryptocurrency owners and established Know Your Customer (KYC) regulations for customer identity verification on crypto exchanges. A draft of the bill was approved by the State Duma in first of three hearings in May.

The biggest expectation was the legalization of cryptocurrency payments, but it is unlikely it would come to pass anytime soon. The bill suggested, though, that in the future, digital currencies could be used as payment “in controlled quantities.”

In September, a lobby group from the Russian Union of Industrialists and Entrepreneurs (RSPP) introduced an alternative cryptocurrency regulation bill. According to RSPP vice-president Elina Sidorenko, the new bill will divide digital assets in three groups and help eliminate contradictions in the state bill that she calls “unfinished and fragmented.”

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