Taxation of mining in Russia will bring the treasury 50 billion rubles annually
The problem of regulating cryptocurrency mining has reached a new level. The day before, Russian President Vladimir Putin discussed it at a meeting with the government. The focus was on the use of the digital ruble and the legislative regulation of cryptocurrencies.
The digital ruble was dealt with quickly at the government meeting. The President called for a move to a more “full-scale implementation” of it in the economy, business activities and finance. The Bank of Russia is involved in the project, and although its representatives were not present at this meeting, the regulator planned to test the use of the digital ruble by citizens next year.
But with mining the story is more interesting. Putin pointed out that the uncontrolled growth in electricity consumption for cryptocurrency mining has already led to a power shortage in the Irkutsk region, Buryatia and the Trans-Baikal Territory. According to the Ministry of Energy, in Russia 16 billion kilowatt-hours are spent annually on mining, that is, almost 1.5% of total electricity consumption. And this figure is constantly growing. “If there is no free power, if it is “chosen” by the so-called mining farms, then new enterprises, residential areas, and social facilities will face supply interruptions,” Putin warned and called for legislative regulation of mining. There is no talk of a ban, since opening the meeting the president indicated that it is important for Russia to “set up a legal framework, create conditions for the circulation of digital assets, both within the country and in relations with foreign partners.” From which we can conclude that the government has plans to use digital money in foreign trade.
“Putin’s position on mining reflects growing concerns about Russia’s energy stability, but does not fully reflect the state’s attempt to use crypto for international payments,” says Sofya Glavina, head of the Digital Economy program at the Institute of Economics and Economics of the Faculty of Economics of the RUDN University. More than 2% of energy in the United States, the leader in cryptocurrency mining, now goes to mining. Russia in 2023 became the second largest country in terms of this indicator, MK’s interlocutor recalled. Currently, the volume of industrial mining in Russia exceeds 1.5 GW. “Taxation of mining activities will bring the country about 50 billion rubles a year from 2026 with the introduction of the approach of taxation of profits from mining activities, tested throughout the world,” said Oleg Ogienko, director of government relations at BitRiver.
With proper regulation, revenues from the mining industry could potentially exceed the costs of its energy supply, especially if we take into account possible investments in the development of energy infrastructure, but the “powers that be” have not been able to come to a consensus on these issues since 2019. As noted by the senior lecturer of the Department of Economic Theory of the Russian Economic University. Plekhanov Kava Khoja, the long discussion of mining regulation in Russia is caused, firstly, by the complexity of these technologies: legislators need time to understand them. Secondly, the cryptocurrency market is very volatile, making it difficult to create long-term regulatory frameworks. Thirdly, Russia is observing the experience of regulating cryptocurrencies in other countries, which also affects the decision-making process. Let us also remember that until 2022 there was a fierce confrontation between the Bank of Russia and the Ministry of Finance on the issue of using cryptocurrencies. The Central Bank opposed “surrogate money” and softened its position only because of the need to use new means of payment to circumvent sanctions after the start of the SVO.
Moreover, the industry is full of problems. The first of them is the danger of developing a “criminal” economy. “Huge funds are in the shadows,” says Polina Gusyatnikova, senior managing partner of PG Partners. “You can do anything with this money, including financing terrorist activities.” It will not be possible to regulate the sphere until some kind of register is created and the authorities understand what is really happening in it.” But even if all law-abiding representatives of the industry are “head counted,” the problem with the power grids that the president spoke about remains. Market participants blame “shadow” miners for its occurrence. “The fight against black and gray miners, who spontaneously, in violation of all norms, connect to electrical networks, creating a colossal load on them, is not being properly carried out,” the head of the Industrial Mining Association, Sergei Bezdelov, was forced to admit.