Russia is taking a tough stance on regulating crypto mining and trading, introducing a draft law that imposes harsh penalties on those who fail to report digital assets to the state. The latest version of the bill threatens to punish those who organize illegal trading of cryptocurrencies with imprisonment and hefty fines.
According to the bill, miners will have to report their income to the tax authorities or face up to four years in prison. They will also be required to provide information about the unique sequence of characters used to account for transactions with digital currency.
The Ministry of Finance proposes severe punishment for miners who evade declaring digital assets. Amendments to the Criminal Code provide that if a miner evades income declaration at least twice within three years, and we are talking about an amount above 15 million rubles (approximately 196,800 USD), he faces up to two years in prison, as well as a fine of up to 300 thousand rubles (3,940 USD) and forced labor for up to two years. If the amount is more than 45 million (590,000 USD), the punishment is tougher: up to four years in prison, a fine of up to two million rubles, forced labor for up to four years.
The bill also provides for two ways to sell cryptocurrencies in exchange for real money: on foreign crypto exchanges or on a Russian site under an experimental legal regime. In Russia, there will be a register of operators for the exchange of digital assets, which can be banks and other legal entities. Everything that does not fit into this framework will be recognized as a violation, for which it threatens up to seven years in prison, a fine of up to one million rubles, and forced labor for up to five years.
The Ministry of Finance has been trying for several years to coordinate with other authorities ways to take the crypt under control. In January, Aleksey Moiseev, the Deputy Minister, declared that the departments “stalled again” and could not agree on the bill on mining, which was submitted to the State Duma in November 2022.
Anatoly Aksakov, head of the Duma Committee on the Financial Market, commented on the situation in December 2022, stating that the bill could create channels for withdrawing funds from the country. The Ministry of Finance was instructed to finalize the bill on mining, and in February 2023, Deputy Chairman of the State Duma Committee on Information Policy Anton Gorelkin informed that “the bill will be rescheduled taking into account new developments, or they will go to the second reading.”
Another bill being considered by the State Duma provides for amendments to the Tax Code. Transactions with digital currency in the amount of more than 600 thousand rubles (7,900 USD) a year will be subject to mandatory tax declaration.
The Federal Tax Service will have the right to demand bank statements of individuals’ accounts if transactions are related to the transfer of digital currency and there are signs of a possible violation of tax laws. This bill specifies a much milder punishment for those who own cryptocurrency but do not report to the tax authorities: a fine of 50 thousand rubles (650 USD), as well as a penalty of 10% of the undeclared amount.
Russia has been a key player in the global crypto market, with its citizens and businesses actively engaged in mining and trading activities. The country’s interest in cryptocurrencies has been fueled by the economic sanctions imposed by the West in response to its annexation of Crimea in 2014. The Russian government has been exploring ways to regulate the crypto industry for several years, with the new draft law being the latest development in its efforts.
In conclusion, the new draft law proposed by the Russian government seeks to regulate the use of cryptocurrencies in the country and curb illegal activities associated with them. While the legislation has garnered support from some quarters, it has also faced criticism for being overly harsh and potentially stifling innovation in the crypto industry. As the world continues to grapple with the evolving nature of cryptocurrencies, it remains to be seen how effective the new law will be in achieving its objectives.
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