- The spotlight on crypto regulations shifts to Russia as government officials seek to punish illegal miners and other offenders with new legislation.
- High energy consumption of bitcoin miners and its effect on the national grid has been cited by Andrey Lugovoy as his party pushes for the bill.
- With recent regulations on the industry coming out of Russia, analysts ponder on the future of digital assets in 2022.
As Bitcoin and other crypto enthusiasts hope for a last-minute turnaround and a bull run to end the year as earlier predicted, the constant fear of punitive government regulations is slowly taking the hope away. Russia has been known for its tough stance on crypto and with recent developments coming out of the Kremlin, the narrative will not be changing soon.
Like China, Like Russia
Andrey Lugovoy, a member of the lower house of the Russian Parliament has announced that the nationalist party is looking to regulate the crypto mining sector. According to Lugovoy, new legislation will help both the state and the miners. He further threatened miners in the country that they could face jail time if they plug their mining equipment into the national grid without the permission of the state.
Crypto miners in the country have been accused of using cheap and subsidized energy and don’t pay taxes after the incentives. Many key regulators in Russia believe that mining is a private venture and should have no support from the state. The argument of regulators is based on the fact that crypto mining uses lots of energy which has been going without regulations and could have a devastating effect on the country in the long run.
The regulation will see miners having to seek permission and pay taxes after energy fees are deducted. Failure on the part of miners to do this will see them breach the provisions of the Administrative and Criminal Code of the Russian Federation. This regulation is lighter than China’s stance which was an all-out ban on mining activities as cities failed to meet their climate quota. However, analysts fear that it might be just a first step in harsh regulations as the enforcement will make miners go on another exodus.
Russia’s Negative Stance on Crypto
A major reason for fears of mining regulation in Russia is as a result of the government’s previous stance on crypto. Vladimir Putin has previously expressed his fears on crypto as “high risk and unstable” before rolling out regulations on the sector. The Central Bank of Russia is also seeking a ban on private crypto as it focuses on its CBDC citing increasing volumes and high-risk investments.
Anatoly Aksakov, the head of the parliamentary Financial Market Committee in expressing his support for the government’s regulations added that the activities of miners are of “no social value to the nation”. Despite the national stance towards private crypto, the crypto transaction volume has surpassed $5 billion each year. China’s clampdown on mining activities led to the migration of miners to Kazakhstan, Russia, and the US making Russia the third-largest crypto mining hub.