Russia is taking bold steps to regulate the growing cryptocurrency sector with the introduction of a new tax bill that could reshape how both crypto miners and traders operate in the country. After gaining approval from the Federation Council, Russia’s upper house of parliament, the bill is one step away from becoming law, pending only the signature of President Vladimir Putin.

This move comes at a time when Russia is navigating economic challenges, particularly in light of US sanctions. As cryptocurrencies continue to become a trillion-dollar industry, Russia aims to ensure it doesn’t miss out on this booming market while also maintaining tighter control over it. Here’s what miners and traders need to know about the new rules that could soon be in effect.

Overview of the New Crypto Tax Bill

At its core, the new bill treats digital currencies as “property,” meaning they will now be subject to taxation. This is a significant shift in Russia’s approach to cryptocurrency, as it formally recognizes digital assets under the law. However, the bill also comes with some favorable aspects for crypto businesses.

Notably, cryptocurrency transactions will be exempt from the Value-Added Tax (VAT), which is often a concern for businesses operating in the crypto space. For the first time, cryptocurrencies will be officially defined as property, which addresses the legal uncertainties that have surrounded their use in Russia.

One of the key features of the bill is a tiered tax system for crypto miners. Those who earn up to 2.4 million rubles annually (around $21,210) will pay a flat 13% tax rate. However, for miners earning above this threshold, the tax rate increases to 15%. This progressive taxation is expected to help the government collect more revenue from higher-earning operations while providing a more favorable tax environment for smaller-scale miners.

Mining Regulations and Reporting Requirements

The new tax bill also places more responsibility on crypto miners. Miners will be required to report their earnings and operations to Russia’s Federal Tax Service (FTS). While mined tokens sold on exchanges will be exempt from VAT, failure to comply with reporting rules could result in fines of up to 40,000 rubles ($354). This is a clear message that Russia intends to closely monitor crypto mining activities within its borders.

In addition to tax reporting, mining companies will now be obligated to provide tax authorities with information about their clients. This marks a significant shift toward greater oversight and transparency in the mining sector.

New Restrictions on Mining Energy Usage

In a move that will affect small-scale miners, Russia has recently introduced new restrictions on the amount of energy unregistered individuals can use for Bitcoin mining. Under these new rules, individuals engaged in crypto mining will be limited to using no more than 6,000 kilowatt-hours of electricity per month. This cap is a clear attempt to regulate the environmental impact of mining while curbing the growth of unregistered, small-scale operations.

The energy cap is likely to hit smaller mining operations the hardest, as large-scale mining companies often have agreements with energy providers that allow them to use significantly more electricity. This move is part of Russia’s broader effort to control the rapidly growing mining sector, which has become a key player in the global crypto ecosystem.

What Happens Next?

With both the State Duma (the lower house) and the Federation Council (the upper house) having approved the bill, it’s now in the hands of President Vladimir Putin to sign it into law. Once signed, the bill will set the tone for how Russia handles crypto in the future. The introduction of these regulations reflects Russia’s desire to integrate cryptocurrencies into its economy while maintaining control over the industry.

For crypto miners and traders in Russia, the coming months will likely bring a more regulated environment. This means they will need to adapt to the new tax structure, report their earnings to the authorities, and comply with restrictions on energy usage if they are involved in mining.

A Global Trend in Crypto Regulation?

Russia’s approach to regulating cryptocurrencies could be a sign of things to come in the broader global landscape. As governments around the world continue to grapple with the challenges of cryptocurrency innovation, many are looking for ways to balance growth and control. While Russia’s tax bill is relatively new, it’s likely to inspire similar measures in other countries as they look to better manage the crypto sector within their borders.

For now, miners and traders in Russia will need to stay informed about the new regulations and ensure they are in compliance to avoid fines or other penalties. With President Putin’s approval, these rules will soon reshape the crypto market in Russia, and possibly set a precedent for other nations to follow.