Crypto Regulations in Russia 2024 -A Pool of Blockchain Development Talent
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Russia, or the Russian Federation, was the world’s largest country by land mass. Situated above Kazakhstan, Mongolia, and China on the map, Russia significantly exceeded China’s geographic coverage but not its population, although it still boasted one of the largest populations globally. The ruble was the national currency of Russia.
In Russia, cryptocurrency usage faced several restrictions due to legislative actions. President Vladimir Putin’s 2020 law legalized cryptocurrency but banned its use for purchasing goods. In 2022, a bill that conflicted with the Bank of Russia classified cryptocurrency as an investment tool rather than legal tender. This bill proposed fines of up to 500,000 rubles for individuals and 1 million rubles for companies involved in crypto trading or issuance.
So in this article, we’ll cover all that is history and also the possible future prospects of cryptocurrencies in the country of Russia.
So, what’s happening in the Russian cryptocurrency regulations? Below is the timeline of a series of events and announcements taken towards the crypto industry. Let us find out more!!
Government’s Stand on CryptocurrenciesThe Russian government welcomed blockchain technology but rejected cryptocurrencies due to their lack of transparency. The ruble was the only legal means of payment, and issuing other currencies was prohibited.
Russia’s stance on cryptocurrencies and blockchain was initially unclear. While the Ministry of Finance tried to regulate cryptocurrencies, the Central Bank wanted to ban them. A bill proposing a ban on cryptocurrency issuance and sales was expected to pass in the second half of 2020.
For many years, Russian authorities explored the potential uses of blockchain technology and cryptocurrencies, focusing on preventing money laundering and corruption. The Central Bank and the Ministry of Finance were the key regulators. The Bank of Russia also developed a central bank digital currency, aiming to expand the pilot program by 2023 and fully launch by 2025. Cryptocurrencies could not be used for payments, and strict licensing rules applied to exchanges. Foreign exchanges had to register in Russia, and all crypto-to-fiat transactions required bank accounts and Know Your Customer checks, showing Russia’s cautious approach to cryptocurrency regulation.
Russian Crypto TaxationThe Russian Ministry of Economic Development plans to call for crypto taxing after the conversion of crypto coins to Russian rubles, according to the Ministry of Economic Development planning to tax cryptos when users realize the crypto profits and convert them into Russian rubles.
Russia’s taxation system for cryptographic assets was relatively straightforward compared to other countries. Taxes on cryptocurrencies were levied on legal entities like exchanges and service providers, as well as on individuals investing in cryptocurrencies.
For exchanges and service providers, income from selling cryptocurrencies was subject to corporate income tax: 13% for domestic companies and 15% for foreign companies. Cryptocurrency issuers were exempt from value-added tax. Russian citizens paid a personal income tax rate of 13% on income from selling cryptocurrencies, and capital gains from cryptocurrency investments were also taxed at 13%.
Despite its simplicity, Russia’s cryptocurrency tax system had the potential to generate substantial revenue. The government estimated it could collect up to 1 trillion rubles (approximately $13 billion USD) annually through these taxes. This significant revenue reflected the effectiveness of the direct tax collection methods employed.
The Russian government fears cryptocurrency may cause “significant erosion” to the country’s tax base. The Head of Federal Tax Service, Daniil Egorov, said that cryptocurrencies are potential means of tax evasion. And also called crypto taxation a recent innovative tax evasion scheme by mentioning that
“we are watching this market closely and understand that this payment system can significantly erode the taxation base.”
Russian Crypto MiningCrypto mining in Russia is partial to individual miners and companies as Individual crypto miners have to pay higher tax rates than businesses involved in the industry. Digital currencies extraction is not yet regulated in Russia whereas authorities are working towards recognizing it as an economic activity by which the Russian government will be benefited by taxing mining profits.
Individual Crypto miners need to pay a 15% tax for the withdrawal of their profits into the traditional financial system. The Head of State Duma Industry Committee, Vladimir Gutenev has recently said that the minimum tax rate for individual crypto traders or companies who engaged in crypto mining must be at least 6% tax. Guten also said that income tax must be paid from miners for cashing out mined crypto coins if they are to be treated as securities in the Russian Federation.
Russia is yet to define the legal status of crypto mining and other cryptocurrencies-related activities, The Central Bank of Russia proposed a blanket ban on “money surrogates” operations such as issuing, trading, and mining of private virtual currencies. The Russian Regulatory bodies, monetary authorities, and other departments have found themselves isolated in favor of the legalization of crypto under strict rules over complete prohibition.
The Ministry of Economic Development announces about allowing crypto mining only in energy-rich regions and is ready to propose special electricity tariffs. Which does a dream come true for crypto miners of Russia.
TimeLine of Historic Events and Announcements25-03-2024: CommEx, Binance’s Russian successor, shut down in April.
CommEx, Binance’s successor in Russia, officially announced the closure of its operations and ceased accepting deposits. After acquiring Binance’s Russian business in September 2023, CommEx began winding down its platform, posting a closure notice on March 25 and halting new registrations.
27-09-2023: Binance Completes Full Exit from Russia Through Sale to CommEX
Binance announced its complete exit from Russia by selling its operations to a newly launched crypto exchange called CommEX.
Binance has entered into an agreement to sell the entirety of its Russia business to CommEX (https://t.co/JJRKCo9coA).
To ensure a smooth process for existing Russian users, the off-boarding process will take up to one year. All assets of existing Russian users are safe and…
06-09-2023: Top Binance Executives in Russia Depart Amid Market Exit Consideration
Binance VP Eastern Europe Gleb Kostarev and CIS director Vladimir Smerkis have announced they have quit the company due to major regulatory challenges related to sanctions in the Russian market. On September 6, Gleb Kostarev announced on Facebook that it was his last day at Binance, stepping down from his roles in various regions.
29-03-2022: A push is expected through the foreign exchange act,
Japan’s government is promoting a revision to its Foreign Exchange Act as it seeks to clamp down on crypto’s transactions to evade sanctions imposed on Russia. The move is in line with western powers attempting to close the loophole sanctions.
28-03-2022: A call from the Energy Minister of Russia on Crypto mining,
The Energy Minister of Russia calls for clear crypto mining regulations in another pulse. He said that by local authorities legal framework should be applied to cryptocurrency mining. Russian Deputy Minister of Energy says that the legal vacuum in the field of cryptocurrency mining needs to be eliminated at the earliest.
29-03-2022: Turning tables for Crypto Mining regulation of Russia,
The Russian Deputy Minister of Energy makes an announcement on legalizing cryptocurrency mining in the country as early as possible. Also, addresses the development of the legal vacuum cryptocurrency mining existing in.
27-03-2022: Economy Minister supports Crypto Legalization in Russia,
The Russian Prime Minister, Economy Ministry supports the legalization of cryptocurrencies. It is necessary to integrate cryptocurrency circulation mechanisms into the crypto’s financial system, said Russian Prime Minister Mikhail Mishustin.
26-03-2022: Bill Targeting Russian Crypto Use Amid Sanctions,
Senator Elizebeth Warren introduces new legislation focused on Russia’s sanctions and potential crypto use. This aims to heighten the focus on Russia and crypto on Capitol Hill.
24-03-2022: Lawmaker’s Bill to stop U.S crypto exchanges from dealing with Russian Wallets.
U.S representative Brad Sherman plans to introduce a bill that would require, U.S-based crypto exchanges to stop facilitating transactions with Russian crypto wallets. Web3 is key to the future of China’s internet, say, regulators.
03-02-2022: Digital financial Assets: The first company included in a register.
The central bank officially announced on Thursday that The Russian Bank registers tokenization service automize as the country’s first digital asset management company. The registration enables its clients with an opportunity to issue digital financial assets.
25-01-2022: Russian Central Bank’s call on Crypto Crackdown.
A report published by the Central Bank says that use of cryptocurrencies threatens the well-being of Russian citizens and the stability of the financial system”.Russia has argued for many years about the use of cryptocurrency for money laundering or to finance terrorism, ultimately labeling crypto as legal status but banning their use as a means of payment.
25-01-2021: Some Russian officials are forced to declare all their crypto holdings and sell all the crypto assets, as a result many questions have been raised from a decree signed by Vladimir Putin in late 2020.
01-12-2020: The governor of the Russian Federation introduces a new bill No.1065710-7 in the state Duma (the country’s parliament) on Amendments to parts One and Two of the Tax code of Russian Federation.
10-08-2020: Russia shoots out the short ban of cryptocurrencies by signing new cryptocurrency law and imposes stringent restrictions on its use as a form of monetary currency.
28-07-2020: cybersecurity firms have identified a rise in Russian crypto scams in the first half of 2020, reporting that 23,000 sites involved in scams are still online targeting the new victims.
03-04-2020:- The Chairman of the Russian State Duma Committee on Financial Markets confirmed the completion of the much-awaited Digital Asset Bill which would regulate cryptocurrency. However, the delay was due to the global coronavirus pandemic.
18-02-2020:- The Central Bank of Russia(CBR) announced in Feb 2020, the successful completion of the pilot platform that allows users to tokenize assets, including equities and currencies.
05-12-2019:- The country’s Ministry of External Affairs has confirmed the report of collaborating with the supreme court and other financial institutions to prepare a draft resolution which would allow authorities to seize cryptocurrencies.
05-11-2019:- The country’s regulatory body, Ministry of Finance proposed a new approach for the cryptocurrencies, where they would be divided into three categories,
- Virtual Assets
- Technical Tokens
- Digital Financial Assets
20-06-2019:– The Central Bank of Russia is exploring the possibilities of issuing its own national cryptocurrency which would not be private assets.
23-07-2018:- The Chairman of the Russian State Duma Committee on Financial Markets announced a new bill on cryptocurrencies was considered which intended to enforce taxes on the crypto trading and mining.
02-03-2018:- The Ministry of Economic Development of Russia, proposed new laws in the previously drafted laws which included tax exemptions on profits of transactions involving cryptocurrencies and also an increase in the individual ICO investments ten times.
13-01-2018:- The Ministry of Finance announced the legalization of cryptocurrencies on approved exchanges.
07-12-2017:- The Russian Government working on the laws to regulate cryptocurrencies proposed to declare mining of cryptocurrencies as illegal as per Deputy Finance Minister of Russia, Aleksey Moiseev.
15-10-2017:- Russian President Vladimir Putin directed the government and the Central Bank of Russia to issue the country’s own cryptocurrency ‘Cryptodouble’. It would be a legal tender which cannot be mined.
09-09-2017:- The Russian government plans to subsidize the energy costs to benefit the miners.
28-07-2017:– The Government of Russia unveiled plans to ban ordinary people from buying cryptocurrencies.
11-03-2016:- The Russian Ministry of Finance which treats cryptocurrencies as ‘surrogates’ proposed to punish the citizens who deal with cryptocurrencies with imprisonment up to 7 years.
28-11-2015:- The Russian Finance Ministry is progressive in exploring the ways the blockchain could be implemented. Deputy Finance Minister Alexey Moiseev said the ministry was working on a draft law that would seek to punish those who convert cryptocurrencies into ruble. He said, “We feel that blockchain technology is very important in the development of various internet-based services”
However, he also told the ministry plans to ban cryptocurrencies.
03-12-2014:- The Ministry of Finance has decreased the penalties for the individuals who potentially face charges for creating, issuing or promoting digital currencies.
13-09-2014:- The Deputy Finance Minister announced the enforcement of the law drafted to ban cryptocurrency transactions by next spring. The miners would face criminal penalties and the exchanges & the online stores accepting bitcoin would be banned.
07-02-2014:- The Central Bank of Russia said, under the current laws, virtual currencies cannot be treated as money but rather be termed as ‘Money surrogates’ which are prohibited.
15-01-2014:- The security committee of the lower house of the state of Duma, approved a draft of a counterterrorism bill that included restrictions on anonymous transactions which included virtual currencies.
ConclusionRussia has emerged as the biggest player in each sector it participates. And also in the crypto market, every move of Russia could impact heavily on the crypto market. Although the government is to streamline the crypto activities, the Central Bank is always in favor of a ban fearing the loss of control over the monetary system.
As Russia is standing as the World’s biggest exporter of natural gas and second-largest supplier of Oil it is accepting Bitcoin as payment for its oil and gas exports is a move understood to be aimed to boost the Russian Currency, which has downgraded. UK, US and European sanctions imposed on the invasion of Ukraine are a strain on the Russian ruble, due to the increase in its cost of living.