Russia’s Central Bank, Finance Ministry at odds over crypto mining
(Kitco News) –
The Russian Central Bank (RCB) said that they theoretically support the bill submitted to the Duma on the legalization of cryptocurrency mining, Interfax reported Wednesday, but their latest conditions are unacceptable to the Ministry of Finance.
“The Bank of Russia conceptually supports the bill if it includes restrictions on transactions of cryptocurrencies obtained as a result of mining,” the RCB source told Interfax. “At the same time, we believe that cryptocurrencies obtained through mining should be sold exclusively using foreign information infrastructure and only to non-residents.”
In the event of its sale within Russia, miners would need to exchange it through an authorized organization.
“We would allow for the possibility of lifting these restrictions within the framework of experimental legal regimes, provided that transactions with cryptocurrencies are made through an authorized organization,” they added. “In general, we take the position that the circulation of digital currency on the territory of the Russian Federation is unacceptable.”
Under the draft law on the regulation of mining, which a group of deputies submitted to the State Duma in November, miners are given two options for selling their mined digital currency: through foreign systems without the need to comply with the law on currency regulation, and through a new platform that would be created in Russia as part of an experimental legal regime. In both cases, transactions must be reported to the Federal Tax Service.
However, the draft bill does not specify that miners’ cryptocurrency must be sold only to non-residents, and the wording about the possibility of sale within Russia does not make clear that there would be only one authorized organization to process them.
“The digital currency obtained as a result of mining may be alienated by the person who has carried out the mining of this digital currency, provided that when making transactions with it, objects of the Russian information infrastructure are not used, except for cases when transactions are carried out in accordance with the established experimental legal regime,” the bill reads.
The situation within the Russian government is also far from settled. Deputy Finance Minister Alexei Moiseev told reporters on Dec. 6 that the Ministry of Finance does not agree with the stated position of the Central Bank.
“We cannot yet accept this new position from the Central Bank,” Moiseev said. “In effect, all mining which is not carried out within the experimental legal regime is banned. That is, all mining must be done through an authorized organization, and this amounts to total licensing. We are against it.”
On Dec. 5, Anatoly Aksakov, chairman of the Duma committee on financial markets, insisted that there were no irreconcilable differences over the bill.
“The positions of the Central Bank and the Ministry of Finance, they agree,” he told attendees at the RCB’s ‘Cryptocurrencies, mining and digital assets’ forum. “There are other departments that are involved in this process, and it’s only a matter of time. The issues are being worked on, and today or tomorrow it will be settled.”
During one of the forum sessions, experts also highlighted the potential risks of miners selling cryptocurrency through foreign exchanges in the event of sanctions.
Alexander Brazhnikov, executive director of RAKIB, the Russian cryptocurrency and blockchain association, noted that it is not yet clear how miners will sell cryptocurrency if sanctions are imposed against them by foreign exchanges. “The Central Bank said: sell through third-party, non-Russian financial institutions, but if this financial institution takes a decision, as some exchanges have, to limit the operations of Russian miners, what will we do next? The miners will say: sorry, we can’t pay for electricity, because we do not have a Russian financial system, so wait. The power companies will not wait, they will turn it off, and that’s it.”
Russia’s State Duma began work last month on a draft amendment to the Digital Financial Assets law in order to create the national crypto exchange in question, with lawmakers and market participants meeting in mid-November to discuss what changes would be required. Representatives of Russia’s regulators, including the Ministry of Finance and the Central Bank, were not at the meetings. Instead, the plan is to first prepare a document that reflects the input of market participants, and then submit it for discussion to the government and the Bank of Russia.
“It makes no sense to pretend that cryptocurrencies do not exist, but the problem is that it circulates in a large stream outside of government regulation,” said Sergey Altukhov, a member of the Economic Policy Committee for United Russia, the party which holds 72% of the seats in the Duma. “These are billions of rubles of lost budget revenues in the form of taxes.”
According to the current language in the draft bill, miners will be able to sell mined digital coins starting Jan. 1, 2023.
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