Are Bitcoins and Mining Legal in Russia? Where was BTC banned?

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For Russia:

From 2022, a law will come into force that will allow transactions with digital financial assets and mining of them. However, he will ban cryptocurrencies as a means of payment in Russia.

Our report examines the legal and policy landscape of cryptocurrencies in Russia and around the world.

The Central Bank of the Russian Federation, referring to the federal law “On the Central Bank of the Russian Federation (Bank of Russia)” dated July 10, 2002 No. 86-FZ, actually labeled cryptocurrency as a money surrogate, without at all revealing the concept of the latter, the cryptocurrency market continues to exist and self-regulate, and the judicial practice is developing in completely unpredictable directions.

Over the past four years, cryptocurrencies have become a widespread phenomenon, prompting more national and regional authorities to regulate them.

One of the interesting aspects of the rapidly growing cryptocurrency market is the dynamic nature of the terms used to describe the various aspects that fall under the crypto industry.

Although the different forms of cryptocurrencies are similar in that they are based on the same type of decentralized technology known as blockchain, with inherent encryption, the terminology used to describe them varies greatly between jurisdictions.

Regulation of cryptocurrencies in Russia

Bill from the Ministry of Finance

The draft law on digital financial assets was published by the Ministry of Finance on January 20, 2022 and submitted to the State Duma on March 20, 2022.

The bill defines “mining” as the activity of obtaining cryptocurrency for the purpose of receiving a reward in the form of cryptocurrency.

Mining is considered a business activity subject to taxation if the miner exceeds energy consumption limits set by the government for three consecutive months.

As for Initial Coin Offerings (ICOs), only qualified investors can participate, except as determined by the Central Bank.

Tokens and coins are classified as property in the bill and are not considered legal tender.

Exchange of tokens for rubles and foreign currencies is allowed, but only through licensed operators. The bill also defines a “smart contract.”

What does RAKIB offer for mining?

The organization appeared back in 2022, and at first did not show itself to be too active.
But then she suggested quite logical things, like creating a Russian pool. This moment has several positive aspects. Firstly, all illegal miners will be able to work “freely” and even receive the status of self-employed, this has already been mentioned in the news. Yes, you will have to pay a certain percentage of mining per month, but you will be a legal employee and will be able (if you wish) to guarantee your pension.

Another advantage of legal mining is the opportunity to advertise your activities. Advertising will attract investors to purchase new equipment and increase mining speed.

We are not saying that everyone must go and register, but simply reminding them of this possibility.

Bill from the Ministry of Digital Development, Communications and Mass Communications

The Ministry of Communications and Mass Communications presented its own concept of the bill on digital financial assets.

He recommends introducing the term “industrial mining”, registering miners with the tax office and establishing requirements for electricity consumption.

The Ministry of Telecom and Mass Communications also recommends exempting miners from taxation for two years in order to stimulate their activities.

Previously, the ministry proposed creating a special exchange platform for miners to ensure transparency in the exchange of cryptocurrencies.

New amendments to the Civil Code of the Russian Federation

Separately, amendments were made to the Civil Code in order to protect the rights of owners of cryptocurrency coins and tokens.

The document defines “digital money” and “digital rights” and provides their judicial protection. The authors argue that these rules will allow coins and tokens to be included in bankruptcy estates or the estate of a deceased person.

The exact dates of adoption of both the bill and amendments to it are still unknown.

Currently, cryptocurrency is not regulated in Russia, which means using cryptocurrencies and investing in them is not prohibited!
Cryptocurrency ban by country

The website bitcoinregulation.world provides information on the legislative regulation of cryptocurrencies by country. The map is correct, except for the Republic of Belarus. Cryptocurrencies are allowed there, moreover, they are not taxed until 2023.

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Taxes on cryptocurrency worldwide: from 0% to 55% Legal regulation of cryptocurrency: history, experience of countries Cryptocurrency: in which countries has it already been accepted?

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Prohibition of mining and cryptocurrencies

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Small factory

The fight against gray miners is not just a matter of monetary compensation: illegal mining is a real threat to ordinary consumers. The publication’s interlocutor notes that for the second year in a row, the organization has observed a sharp increase in electricity consumption in winter (when it is easier to cool farms due to natural weather conditions), which leads to overloading of networks and their failure.

— The most problematic points in this direction are the settlements of Khomutovo, Granovshchina and Baklashi\Vvedenshchina in the Shelekhovsky district. The main reason for the increase in the useful supply of electricity is the active generation of cryptocurrency, says Romanova. — Residents of the listed settlements pay for electricity at the lowest, so-called rural tariff — 0.861 kWh, which makes cryptocurrency mining activities the most economically profitable.

Freeze for bitcoins_3

Photo: IZVESTIA/Zurab Javakhadze

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It is important to understand that the load profile when consuming electricity for household needs differs significantly from the load profile of mining consumption - it is round-the-clock and continuous, which imposes an additional load on the network infrastructure. In fact, such farms operate 24/7, that is, their network simultaneity coefficient is equal to one - this is more than that of an aluminum smelter. Household networks are designed for coefficients of 0.2–0.4 in summer and 0.6–0.7 in winter.

A representative of the NP Market Council association, in an interview with Izvestia, added that in addition to the increase in accident rates, illegal immigrants worsen economic conditions for other consumers of electricity, because businesses, in fact, pay more for it so that it remains relatively cheap for ordinary people.

— It should be noted that tariffs for the population and equivalent categories of consumers are set by regional regulators at a level significantly lower than prices for other consumers. The spread of household mining could lead to an increase in the already extremely high level of cross-subsidization and affect tariffs for other consumers, which will only aggravate the situation, says the publication’s interlocutor.

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Warnings

One of the most common actions identified in the jurisdictions studied was government notices about the pitfalls of investing in cryptocurrency markets.

Such warnings, mostly issued by central banks, are mainly intended to educate citizens about the difference between fiat currencies, which are issued and guaranteed by the government, and cryptocurrencies.

Most government warnings note the additional risk arising from the high volatility associated with cryptocurrencies and the fact that many exchanges that facilitate such transactions are unregulated.

Most also note that citizens who invest in cryptocurrencies do so at their own personal risk, and that they are not provided with any legal recourse if they lose their money.

Many warnings issued by various countries also note the opportunities that cryptocurrencies create for illegal activities such as money laundering.

BitMEX exchange will issue its own token

On February 1, 2022, the cryptocurrency derivatives exchange BitMEX will issue the BMEX token and conduct an airdrop. Platform users can already earn an asset for registering by completing KYC procedures or using the referral system. In the future, BMEX will provide discounts on commissions.

The ability to trade and withdraw BMEX will appear approximately at the beginning of the second quarter of 2022, when the BitMEX spot platform is launched.

Strict regulation

Some of the countries studied went beyond simply warning the public and expanded their anti-money laundering and anti-organized crime laws to include cryptocurrency markets, and require banks and other financial institutions that facilitate such markets to comply with all due diligence requirements. established in accordance with their laws.

For example, Australia, Canada and the Isle of Man have recently passed legislation to bring cryptocurrencies and the institutions that facilitate them within the purview of money laundering and counter-terrorist financing laws.

Some jurisdictions have gone further and placed restrictions on investments in cryptocurrencies, the extent of which varies from one jurisdiction to another.

Others (Algeria, Bolivia, Morocco, Nepal, Pakistan and Vietnam) prohibit any activities related to cryptocurrencies.

Qatar and Bahrain take a slightly different approach in that they prohibit their citizens from engaging in any cryptocurrency-related activities locally, but allow citizens to do so outside their borders.

There are also countries that, while not prohibiting their citizens from investing in cryptocurrencies, impose indirect restrictions by preventing financial institutions within their borders from facilitating crypto-related transactions (Bangladesh, Iran, Thailand, Lithuania, Lesotho, China and Colombia).

Legalization of cryptocurrencies

Not all countries see the emergence of blockchain technology and cryptocurrency as a threat. Some jurisdictions examined for this report, while not recognizing cryptocurrency as legal tender, see potential in the technology behind it and are developing cryptocurrency regulatory regimes as a means to attract investment in technology companies that have succeeded in the sector.

This class includes countries such as Spain, the Republic of Belarus, the Cayman Islands and Luxembourg.

Some jurisdictions are looking to go even further and develop their own national cryptocurrency.

This category includes a diverse list of countries such as the Marshall Islands, Venezuela, Eastern Caribbean Central Bank (ECCB) member countries, France, China and Lithuania.

Additionally, some countries that have warned the public about the pitfalls of investing in cryptocurrency have also determined that the market size is too small to raise enough concern about the need for regulation and/or ban at this stage (Belgium, South Africa and the UK).

Tax problem

One of the many issues that arise when allowing investment in and use of cryptocurrencies is the issue of taxation.

In this regard, the problem appears to be how to classify cryptocurrencies and the specific activities associated with them for tax purposes.

This matters primarily because depending on whether the profits made from mining or selling cryptocurrency are classified as income or capital gains will invariably determine the applicable tax burden.

Countries surveyed classified cryptocurrencies differently for tax purposes, as shown in the following examples:

Mainly thanks to a 2015 European Court of Justice (ECJ) decision, profits from cryptocurrency investments are not subject to value added tax in European Union member states.

In most of the countries studied for this report that have or are in the process of developing tax rules, cryptocurrency mining is also exempt from taxation.

However, in Russia, coin mining that exceeds a certain energy consumption threshold will most likely be taxed.

How to assess the profitability and risks of mining?

Today, there are a lot of services on the network for calculating the effectiveness of a particular device in Russian realities. For example, a calculator from NiceHash is ideal for these purposes. It will make an approximate forecast based on the entered data.

Here is the approximate profitability of mining several devices of different power, with a hypothetical Bitcoin exchange rate of $20,000, taking into account electricity costs of 3.5 rubles (since tariffs change all the time, the price of electricity is conditional) per kW/h:

• Antminer S19 pro 110 Th/s (terahashes/second) - 22,000 rubles per month.
• Antminer S9 13.5 Th/s (terahashes/second) - 500 rubles per month.
• Whatsminer M30S 86 Th/s (terahashes/second) - 16,000 rubles per month.

The main risk in mining is associated with constant fluctuations in the rate of mined coins. Whether you are mining Bitcoin or altcoins, a drop in exchange rate can be fraught with a critical decrease in profits, so much so that energy costs will exceed earnings. In addition, there are also some technical risks, since cryptocurrency mining equipment is a very complex device. You need to carefully check the counterparty from whom you are buying equipment, its history and reviews. Beware of purchases on non-core sites for used equipment. There are no legal dangers.

Expert advice

The main difficulties for a novice miner arise at the very beginning. Choosing equipment and making a profitability forecast are difficult steps that are best done under the supervision of more experienced comrades. For my part, I would advise turning to people who already have experience in this area. If you don’t have such acquaintances, then thematic forums will always come to the rescue.

Means of payment

A small number of jurisdictions accept cryptocurrencies as a means of payment.

In the Swiss cantons of Zug and the municipality of Ticino, cryptocurrencies are accepted as a means of payment even by government agencies.

The Isle of Man and Mexico also allow cryptocurrencies to be used as a means of payment alongside their national currency.

Similar to governments around the world that fund various projects by selling government bonds, the government of Antigua and Barbuda allows funding for projects and charities through government-backed ICOs.

Bitcoin price surpassed $51,000, but failed to gain a foothold above this level

On Thursday, December 23, quotes of the first cryptocurrency rose above $50,000, and the next day they exceeded $51,000. Digital gold failed to gain a foothold above this mark. At the time of writing, the asset is trading near $50,150.

BTC/USDT hourly chart of the Binance exchange. Data: TradingView.

Bitcoin pulled the rest of the market along with it. According to CoinGecko, all digital assets from the top 10 by capitalization closed the week in the green zone. The Terra project token (LUNA) has risen in price by almost 34% over the past seven days, reaching a historical high above $100.

Data: CoinGecko.

Maximums also updated the tokens of the NEAR Protocol (NEAR) and Polygon (MATIC) projects.

According to the CoinCodex service, over the week, among the digital assets with moderate capitalization, the token of the financial P2P platform Veritaseum increased in price the most. The price of VERI increased by 153%, and capitalization reached $364.28 million.

The metaverse cryptocurrency YooShi (YOOSHI) fell in price the most. Its price decreased by 10%, capitalization amounted to $374.36 million.

Data: CoinCodex.

The total capitalization of the cryptocurrency market was $2.5 trillion. The Bitcoin dominance index has dropped to 38%.