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Mining by law
Anatoly Aksakov, chairman of the Duma committee on financial market paid close attention to the topic of mining at St. Petersburg economic forum (SPIEF, June 14-17, 2023).
He noted that by the end of the year the new bills somehow related to mining would pass the second and third readings.. Probably, this could include amendments to the Tax Code, amendments to the law related to CFA (digital financial assets) and even the adoption of the Federal Law “On Experimental Legal Regimes in the Field of Digital Innovation in the Russian Federation” and/or other initiatives.
Legislators’ attention to certain areas in Russia is often a wake-up call. In this case, however, the concern seems to stem from real problems that miners have begun or will begin to face in the coming months.
Budget deficits and halving
The country’s budget has been under pressure for the past year due to changed geopolitical circumstances. So in January-May 2023, there was a budget deficit of almost 3.5 trillion rubles. This may be one of the reasons why officials’ attention has turned to a grey area in terms of the legal field – mining.
After all, it is possible to impose a tax not only on cryptocurrency mining, but also indirectly on those who mine in a gray. More precisely, to impose on them the maximum responsibility. Even now the law provides that for non-payment of customs duties faces a fine of 100 thousand to 1 million rubles.. Yes, and you can get up to 12 years in prison.
Miners have long been on the radar of regulators. In 2019, the Federal Customs Service (FCS) accused Far East Trading and Industrial Company (FETIC) of failing to pay a substantial duty of $1.2 million. Not only did the company smuggle the equipment into Russia illegally, but it also committed fraud by submitting false documents.
Authorities want to reflect the concept of mining in the law to replenish the budget and protect the public. But there is another reason.
In spring 2024 there will be another bitcoin halving – the reward per block will be halved, namely 3.125 BTC. Thus, miners will be paid less for the same work. Now is the time to jump into the last car of the departing train, when the reward for the block is 6.25 BTC.
Historical data shows that halving often causes the value of BTC to rise – mined coins can be sold at a higher price. As a result, an increase in demand for equipment, including gray and used. This could lead to the problems described above: fires and budget deficits, which will not profit from the legal sale of miners. On the other hand, buying white devices ahead of time can minimize the likelihood of many negative consequences.
Early warning signs
While new laws to regulate mining have yet to be passed, community members have already begun to worry about the fate of their mine farms. And some have very good reasons for that.
As recently as last year, tenders began appearing on the government procurement website to identify illegal miners, and in recent weeks, authorities seem to have moved from words to actions. Owners of mining farms began to report more frequent inspections by law enforcement agencies in Telegram chats. In particular, one user said that the police checked the documents for the possession of ASIC-mainers.
In another Telegram chatroom, Irkutsk miners report similar incidents. Users have reported that checks on the legality of the equipment being used have increased.
The fight against illegal mining has been going on for a long time. Previously, it was mainly due to the theft of electricity. Now the authorities are more concerned about the lost tax from the sale of illegal equipment, which can be of poor quality, leading to fires and other incidents.. Because sellers of illegal equipment are harder for the authorities to find than miners who own it, farm owners will have to pay for the gray schemes.
A source, who requested anonymity, told the editorial board that the fight against illegal mining is already underway and following the adoption of the new law, there will be checks all over the country for the legality of the equipment imported.
According to a source close to the development of the regulation, raids on data centers will be conducted in the next six months to identify illegal mining. Owners of cryptocurrency mining equipment should already be concerned about the availability of proof of purchase. Otherwise, you may find yourself in a situation where taxes and customs duties will have to pay the owners of gray equipment, which may be subject to confiscation.
This material and the information in it does not constitute personal or other investment advice. The editorial opinion does not necessarily reflect the opinions of the author, analytical portals and experts.