Russia has been steadily moving towards full regulation of its crypto mining industry, as government officials and industry leaders met at the first forum of the Industrial Mining Association (IMA) in Moscow.
The event, which happened on October 14, involved 70% of Russia’s crypto mining farms, showing that the country is increasingly interested in the sector. The discussions centred mainly on taxation, legal aspects of mining, and impact of crytocurrencies on cross border business transactions.
Taxation Framework for Crypto Miners
The primary discussion point of the forum was the proposal made by the Russian Federal Tax Service (FTS) to introduce a two-tier tax system for crypto-mining companies. The recommended plan to tax miners is proposed to be implemented at two key points.
First, miners will be expected to make a deposit once they get cryptocurrency into their wallets. In the second stage, another tax payment or deduction would be calculated on the basis of the price at which the mined coins are sold or transferred from the wallet.
FTS official Alexey Katyayev noted that there is no final decision on the issue of the taxation system. Nonetheless, crypto mining will not be taxed with Value Added Tax (VAT) since cryptocurrencies are not meant for consumption within the country. Concurrently, individual miners will still be required to pay personal income tax on their profits.
Cross-Border Payments and Experimental Legal Regime
Another key area of discussion at the forum was the possibility of using mined cryptocurrencies for cross-border payments, especially under the Russia crypto mining’s Experimental Legal Regime (ELR). At the present moment, the Bank of Russia is developing the necessary infrastructure for the implementation of cross-border operations with the help of digital currencies.
Nevertheless, there were different views on this matter. Some of the respondents complained that domestic production of crypto mining may not be adequate for export purposes. Some argued that instead of using cryptocurrencies, one should employ other financial digital assets designed for the international market.
Though details on the experimental regime remain scarce, it was agreed that information about the participants and trials’ results should not be made public. Anton Tkachev, Deputy Chairman of the State Duma Committee on Information Policy, noted that the anonymity of the experiment is crucial to avoid possible penalties and retain competitiveness in the Russian cryptocurrency mining sector.
Crypto Mining Registry and Compliance
In an attempt to increase the industry’s transparency, the Russian Federal Tax Service also suggested the creation of a national register of crypto miners. To this end, miners and other companies that engage in the cryptocurrency mining business will be required to provide information such as the location of their data centers, power consumption, and origin of the mining rigs used.
Additionally, they will be required to report their cryptocurrency output and electricity usage. While much of this data will remain confidential, the registry aims to ensure greater oversight and compliance with the law.
According to Katyayev, businesses that engage in crypto mining alongside other sectors such as manufacturing, cannot claim deductions in one area to offset against earnings in the other. However, he pointed out that regulation will enhance competition in the sector through the provision of clear legal framework.
Outlook for Russia’s Crypto Mining Industry
The consensus among forum participants was that crypto mining in Russia has a bright future, especially as the government continues to develop comprehensive regulations.
According to Igor Runets, the CEO of BitRiver, the industry will generate new opportunities in the next 1-2 years as the required facilities for energy-consuming computing like artificial intelligence are set up.
The two features that are likely to make market players list their companies on the stock exchanges include transparency and legal certainty. Timofey Semenov, CEO of Intelion Data Systems, noted that this will open up new capital opportunities for large companies, which is crucial for the further development of Russian crypto mining.
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