Russian State Duma Approves Cryptocurrency Mining and Foreign Market Payment Bills in First Reading

On July 24, 2024, the Russian State Duma passed in the first reading two bills concerning cryptocurrency mining and the use of cryptocurrencies for foreign market transactions:

• No. 237585-8: “On Amendments to Certain Legislative Acts of the Russian Federation (regarding the regulation of digital currency)”
• No. 341257-8: “On Amendments to Certain Legislative Acts of the Russian Federation (regarding the establishment of experimental legal regimes in the field of digital innovation in the financial market)”

According to the bill legalizing mining, only Russian legal entities and individual entrepreneurs included in a special registry will be allowed to engage in mining. Individuals will be able to mine cryptocurrency without being included in the registry, but must not exceed established energy consumption limits. Additionally, miners will be required to provide an authorized body with information about the digital currency they receive as a result of their activities, as well as their address identifiers.

The Federal Financial Monitoring Service (Rosfinmonitoring) will maintain a list of address identifiers suspected of being used for money laundering or terrorist financing.

Recently, the State Duma also passed, in its third and final reading, a separate law requiring miners to comply with anti-money laundering regulations. This is a separate document and is not directly related to the mining and cryptocurrency regulation bill.

The review of the mining bill was expedited in light of new sanctions against the Russian financial sector, according to Anton Gorelkin, Deputy Chairman of the State Duma Committee on Information Policy. He stated:

“There are proposals to legalize cryptocurrency for foreign trade payments. Iran, which has nearly half a century of experience surviving under Western economic pressure, did this at one time. Like Russia, Iran started by legalizing industrial mining. Then, Bitcoin was carefully integrated into the country’s financial system, and state control was established over the domestic cryptocurrency infrastructure.”

Gorelkin also noted that the bill will help eliminate the “gray” mining market, which causes energy shortages in certain regions:

“Due to the lack of regulation, budgets at all levels are missing out on up to 100 billion rubles a year. We are also seeing energy shortages in several regions due to the activities of ‘gray’ and black market miners, and we cannot attract investment. Russia currently ranks second in the world for mining, with the potential to take first place. This is a very promising growth point for our exports. We can sell electricity with high added value.”

According to Gorelkin, the bill lays the foundation for further development of the entire regulatory framework:

“We will also be able to retain many young IT specialists, for whom the development of this industry is the key to successful work in our country. Mining involves artificial intelligence technologies and blockchain technologies. In addition, cryptocurrencies will allow us to bypass unfair sanctions quite effectively. By the second reading, United Russia will seek amendments to remove certain safeguards, as this bill should become the basis for the emergence of a national cryptocurrency infrastructure.”

Before the vote, Anatoly Aksakov, Chairman of the Financial Market Committee, presented a report outlining all the provisions of the bills. He added that a criminal record for economic crimes, crimes against the state, or other serious offenses would be an obstacle to being included in the mining registry.

Aksakov also suggested that the mining bill would address the problem of excessive electricity consumption, citing an example where an entire neighborhood in one city lost power due to mining activities.

Deputies raised many questions about the uncertain status of cryptocurrencies in Russia and expressed doubts that miners would comply with the new obligations. Aksakov, Gorelkin, and other bill authors responded that all comments would be considered before the second reading.

As a result, the first bill was passed in the first reading by a majority vote with one abstention. The amendments regarding cryptocurrency payments on the foreign market were adopted unanimously.