Russia’s Cryptocurrency Regulation in 2024: A Reservoir of Blockchain Development Talent
Russia currently holds significant influence in the global blockchain space, serving as a powerhouse for talent and business acumen in the industry. As such, any decisions made by the Russian government regarding cryptocurrencies are bound to have a significant impact on the crypto community, which heavily relies on Russian development talent.
In the wake of Russian forces invading Ukraine, the crypto world found itself in the global spotlight as investors from around the world donated millions of dollars worth of cryptocurrency to support the Ukrainian government.
In this article, we will explore the historical context and future prospects of cryptocurrencies in Russia.
Russian Cryptocurrency Regulations: A Timeline
March 29, 2022: Expected push for foreign exchange act revision
Japan’s government is pushing for a revision to its Foreign Exchange Act, aiming to crack down on cryptocurrency transactions that evade sanctions imposed on Russia. This move aligns with the efforts of western powers to close sanctions loopholes.
March 28, 2022: Energy Minister’s call for clear crypto mining regulations
The Energy Minister of Russia calls for the implementation of clear regulations for cryptocurrency mining. He emphasizes the need for a legal framework established by local authorities. The Deputy Minister of Energy echoes this sentiment, highlighting the urgency to eliminate the legal vacuum surrounding cryptocurrency mining.
March 29, 2022: Turning tables on crypto mining regulation in Russia
The Russian Deputy Minister of Energy announces plans to legalize cryptocurrency mining in the country as soon as possible. He also addresses the existing legal vacuum surrounding cryptocurrency mining.
March 27, 2022: Economy Minister supports cryptocurrency legalization in Russia
The Russian Prime Minister and the Economy Ministry express support for the legalization of cryptocurrencies. The Prime Minister, Mikhail Mishustin, emphasizes the need to integrate cryptocurrency circulation mechanisms into the financial system.
March 26, 2022: Bill targeting Russian crypto use amid sanctions
Senator Elizabeth Warren introduces new legislation focused on Russia’s sanctions and potential use of cryptocurrencies, aiming to increase attention on Russia and crypto on Capitol Hill.
March 24, 2022: Lawmaker’s bill to stop US crypto exchanges from dealing with Russian wallets
U.S. Representative Brad Sherman plans to introduce a bill that would require U.S.-based crypto exchanges to cease facilitating transactions with Russian crypto wallets.
February 3, 2022: Digital financial assets – first company included in a register
The central bank officially announces the registration of tokenization service automize as the country’s first digital asset management company. This registration enables clients to issue digital financial assets.
January 25, 2022: Russian Central Bank’s call for crypto crackdown
The Central Bank publishes a report stating that the use of cryptocurrencies poses a threat to the well-being of Russian citizens and the stability of the financial system. While Russia has debated the use of cryptocurrency for money laundering or terrorism financing, it is currently legal but not accepted as a means of payment.
Government’s Stance on Cryptocurrencies
The Russian government embraces blockchain technology but rejects cryptocurrencies due to the lack of transparency in cryptocurrency transactions. The Russian Ruble is the only accepted means of payment in Russia, and the issuance of any other currencies is prohibited.
The country’s stance on cryptocurrencies and blockchain has been ambiguous, as what was once expected to be regulated may now face a potential ban. While the Ministry of Finance aims to regulate cryptocurrencies, the Central Bank of Russia advocates for a ban. A bill proposing a blanket ban on cryptocurrency issuance and sales is expected to be passed in the second half of 2020.
For years, Russian authorities have focused on the potential use of blockchain technology and cryptocurrencies, primarily to combat money laundering, corruption, and other illegal activities. The Central Bank of Russia and the Ministry of Finance serve as key regulators in the cryptocurrency space.
Russian Crypto Taxation
The Russian Ministry of Economic Development plans to implement crypto taxes on the conversion of cryptocurrencies into Russian rubles. If accepted, these transactions would be subject to a 13% tax in most cases, based on income tax rates.
The Russian government is concerned that cryptocurrencies could significantly erode the country’s tax base. The Head of the Federal Tax Service, Dangill Egorov, views cryptocurrencies as potential tools for tax evasion. He refers to crypto taxation as an innovative tax evasion scheme and emphasizes the need to closely monitor this market.
Cryptocurrencies are classified as taxable property in Russia, and a law on cryptocurrency taxation was passed in parliament in February but has not progressed further.
Russian Crypto Mining
Crypto mining in Russia is primarily carried out by individual miners and businesses. Individual crypto miners face higher tax rates compared to companies involved in the industry. While crypto mining is not yet regulated in Russia, authorities are working towards recognizing it as an economic activity to benefit from taxing mining profits.
Individual crypto miners are required to pay a 15% tax on their profits when withdrawing funds into the traditional financial system. The Head of the State Duma Industry Committee, Vladimir Gutenev, proposes a minimum tax rate of 6% for individual crypto traders or mining companies. He also suggests that income tax should be paid by miners when cashing out mined crypto coins if they are treated as securities in the Russian Federation.
Russia has yet to define the legal status of crypto mining and other crypto-related activities. The Central Bank of Russia has proposed a blanket ban on operations involving “money surrogates,” such as issuing, trading, and mining private virtual currencies. However, various Russian regulatory bodies and departments are in favor of legalizing crypto under strict regulations rather than imposing a complete prohibition.
The Ministry of Economic Development has announced plans to allow crypto mining only in energy-rich regions and proposes special electricity tariffs, making it a dream come true for Russian crypto miners.
Historical Events and Announcements
January 25, 2021: Russian officials forced to declare and sell crypto holdings
Russian officials are compelled to declare all their crypto holdings and sell their crypto assets following a decree signed by Vladimir Putin in late 2020.
December 1, 2020: Governor introduces new bill on tax code amendments
The governor of the Russian Federation introduces a new bill in the state Duma, proposing amendments to the tax code of the Russian Federation.
August 10, 2020: Russia imposes strict restrictions on cryptocurrency use
Russia enforces a short ban on cryptocurrencies, signing a new cryptocurrency law that imposes stringent restrictions on their use as a form of monetary currency.
July 30, 2020: Rise in Russian crypto scams
Cybersecurity firms report a rise in Russian crypto scams in the first half of 2020, with 23,000 scam-related sites still online, targeting new victims.
April 3, 2020: Completion of Digital Asset Bill
The Chairman of the Russian State Duma Committee on Financial Markets confirms the completion of the Digital Asset Bill, which aims to regulate cryptocurrencies. However, its progress is delayed due to the global coronavirus pandemic.
February 18, 2020: Completion of pilot platform for tokenizing assets
The Central Bank of Russia announces the successful completion of a pilot platform that allows users to tokenize assets, including equities and currencies.
December 5, 2019: Preparation of draft resolution to allow authorities to seize cryptocurrencies
The country’s Ministry of External Affairs collaborates with the supreme court and other financial institutions to prepare a draft resolution that would enable authorities to seize cryptocurrencies.
November 5, 2019: Proposal for new approach to categorizing cryptocurrencies
The Ministry of Finance proposes a new approach that categorizes cryptocurrencies into three categories: virtual assets, technical tokens, and digital financial assets.
June 20, 2019: Exploration of national cryptocurrency
The Central Bank of Russia explores the possibility of issuing its own national cryptocurrency, which would not be considered private assets.
July 23, 2018: Consideration of new bill on cryptocurrencies
The Chairman of the Russian State Duma Committee on Financial Markets announces the consideration of a new bill on cryptocurrencies, aiming to enforce taxes on crypto trading and mining.
March 2, 2018: Proposal for tax exemptions and increased ICO investments
The Ministry of Economic Development proposes new laws that include tax exemptions on profits from cryptocurrency transactions and a tenfold increase in individual ICO investments.
January 13, 2018: Legalization of cryptocurrencies on approved exchanges
The Ministry of Finance announces the legalization of cryptocurrencies on approved exchanges.
December 7, 2017: Proposed ban on cryptocurrency mining
The Russian government works on laws to regulate cryptocurrencies and proposes declaring the mining of cryptocurrencies illegal.
October 15, 2017: Russian President’s directive on national cryptocurrency
Russian President Vladimir Putin instructs the government and the Central Bank of Russia to issue the country’s own cryptocurrency, known as “Cryptodouble.” This cryptocurrency would serve as legal tender and cannot be mined.
September 9, 2017: Subsidization of energy costs for miners
The Russian government plans to subsidize energy costs to benefit crypto miners.
July 28, 2017: Plans to ban ordinary people from buying cryptocurrencies
The Russian government unveils plans to ban ordinary people from purchasing cryptocurrencies.
March 11, 2016: Proposal to punish cryptocurrency-related activities
The Russian Ministry of Finance proposes a law to punish individuals involved in creating, issuing, or promoting digital currencies.
November 28, 2015: Exploration of blockchain technology
The Russian Finance Ministry explores the implementation of blockchain technology, recognizing its significance in developing various internet-based services. However, it also plans to ban cryptocurrencies.
December 3, 2014: Decreased penalties for creating and promoting digital currencies
The Ministry of Finance reduces penalties for individuals potentially facing charges related to creating, issuing, or promoting digital currencies.
September 13, 2014: Draft law to ban cryptocurrency transactions
The Deputy Finance Minister announces the enforcement of a law that aims to ban cryptocurrency transactions. Miners would face criminal penalties, and exchanges and online stores accepting bitcoin would be prohibited.
February 7, 2014: Virtual currencies classified as “money surrogates”
The Central Bank of Russia states that, under current laws, virtual currencies cannot be considered money but rather “money surrogates,” which are prohibited.
January 15, 2014: Legalization of cryptocurrencies on approved exchanges
The Ministry of Finance announces the legalization of cryptocurrencies on approved exchanges.
December 7, 2013: Consideration of ban on cryptocurrency mining
The Russian government considers laws to regulate cryptocurrencies and proposes declaring the mining of cryptocurrencies illegal.
Conclusion
Russia is a major player in various sectors, including the crypto market. Any actions taken by Russia can have a significant impact on the industry. While the government aims to streamline crypto activities, the Central Bank is cautious about potential loss of control over the country’s monetary system.
To boost the Russian currency, which has experienced a 20% decline this year, Russia has started accepting Bitcoin as payment for oil and gas exports. The UK, US, and European sanctions imposed due to the invasion of Ukraine have strained the Russian ruble, leading to increased living costs.
Overall, Russia’s involvement in cryptocurrencies and blockchain remains complex. While there is a recognition of the potential of blockchain technology, cryptocurrencies face uncertainty and potential bans. The Russian government continues to navigate this landscape, with various regulatory bodies and departments expressing differing views on the legalization and regulation of crypto activities.