Russia Reorganizes Mining with a New Law Effective from November

While many Bitcoin media outlets received the law positively, a guest author who knows the subject from practical experience explains why this is a misconception.

Russia is reportedly legalizing crypto mining with a new law. Most media outlets are simply echoing this news uncritically from Russian government sources, often happy with a headline that’s “good for Bitcoin,” even when it involves Russia.

One of our readers, who knows more about the topic from personal experience, sees it much more critically. The new law is akin to a ban on exchanges and wallets and attempts to force the vital but also rebellious Russian Bitcoin scene into Moscow’s state agenda.

Therefore, I am publishing here a commentary jointly worked out with him.

A guest post by an anonymous reader

The Current Legal Situation

To understand what the new law, effective from November 1, entails, one must understand the current legal situation.

Firstly, Bitcoin mining in Russia has not been illegal so far. For a long time, there was uncertainty, and mining operated in a gray legal area. With the “Digital Financial Assets Law” (DFA Law) effective from January 1, 2021, mining was first defined as an entrepreneurial activity that could be regulated and taxed.

Consequently, Russia began to regulate mining more strictly, especially regarding energy consumption and taxes. Additionally, discussions and legislative proposals aimed to regulate mining more explicitly at the national level.

Buying, selling, and owning cryptocurrencies such as Bitcoin is currently legal for private individuals. However, they are not allowed to use these as legal tender. You cannot buy goods and services with Bitcoin; the Ruble remains the only official currency in Russia.

The new law, coming into effect on November 1, 2024, aims to better control the energy consumption and taxation of mining. Due to its abundant cheap energy sources, Russia has become an important location for Bitcoin mining, especially in regions like Irkutsk and Krasnoyarsk.

A Ban on Public Exchanges

To correctly assess the soon-to-be law, a critical look at the law signed by President Putin in early August 2024 (Federal Law of 08.08.2024 No. 221-FZ) is necessary. It can be read on the website for the official publication of legal acts.

First: The new law has nothing to do with further legalizing Bitcoin in Russia, and it is not a step toward a more liberal economic order. Quite the opposite, in fact.

Russia continues to forbid its citizens to use cryptocurrencies as a means of payment or exchange for domestic transactions. Furthermore, crypto exchanges face massive restrictions in working with their Russian private customers.

The law states: „In the Russian Federation, it is prohibited to offer digital currencies or goods (works, services) to an indefinite circle of persons to organize or facilitate the circulation of a digital currency.“ Practically, this equals a ban on public exchanges and wallets.

Additionally, the law bans any advertising for digital currencies, including for goods (works, services) „to organize or facilitate the circulation of a digital currency.“

Russian citizens wishing to buy Bitcoin already face significant restrictions, as I can confirm from personal experience. Ruble deposits via bank transfer are only possible with a few providers, and this is no longer an option at most crypto exchanges.

The new law applies to all domestic and foreign exchanges offering their services to Russian citizens. Hence, it seems that any crypto exchange will be de facto forbidden to transact with Russian individuals. However, how strictly this law will be enforced remains to be seen.

Miners as Government Tools for Sanction Circumvention

Now, moving on to what the international press has reported: Mining.

Indeed, the new law allows licensed and monitored miners to mine Bitcoins from September. But this is only for use in international transactions.

In coordination with the Central Bank, the government will formulate requirements regulating mining by natural and legal persons. The government will have the power to ban cryptocurrency mining in certain Russian regions.

Legal entities and individual entrepreneurs mining cryptocurrencies, as well as operators of mining infrastructure, will need to register with a special registry maintained by the Russian Ministry of Digital Technologies, Communications, and Mass Media.

Citizens who are not individual entrepreneurs and mine cryptocurrencies will be exempt from this new regulation if their energy consumption does not exceed a certain limit. However, they must still provide the Federal Financial Monitoring Service of Russia with information about the mined currency and the identification addresses.

So yes, Russia allows mining – but under stringent regulations and thorough oversight.

Digital Financial Assets

Besides these two key sections on trading and mining, the law contains further paragraphs.

It specifies, for instance, the prohibition on using digital currencies for financial settlements. This does not apply to currencies mined by Russian miners.

There is also a clause on digital financial assets, presumably referring to „crypto-assets,“ such as bonds or other securities represented as tokens. The law allows their trade, even if they are based abroad, on Russian blockchain platforms. However, the Bank of Russia (the Central Bank) will have the authority to ban the placement of individual