Lassoing The Crypto-Mining Cowboys – Russia Briefing News

Kazakhstan and Russia are getting serious in regulating crypto miners

By Paul Goncharoff

Russia and Kazakhstan are endeavoring to regulate and standardize the crypto mining industry. It looks like the free-wheeling, low-cost energy and untaxed niches of Kazakhstan as well as Russia are finally succumbing to the pressures of regulation as ‘cowboy’ days are numbered.

Kazakhstan now requires that miners be licensed, with the Digital Development Ministry is driving these regulatory efforts, with daily monitoring to be performed by Kazakhstan’s International Financial Center.

Starting in 2024 Kazakh miners will have to trade at least three quarters of their crypto through locally registered Kazakh exchanges only. It has been noted that most if not all local miners trade their crypto on exchanges outside their country or on locally non-registered, unregulated grey exchanges. Last year was notable in Kazakhstan as many crypto farms were searched and over 65,000 mining processors seized in raids in efforts to shed light on their practices, the owners facing various charges, hence the dates in court.

These moves are intended to ensure that the government receives its tax entitlement, protects the national and regional power grids, and improving business transparency. To facilitate these new rules will require the registration of all in-country mining equipment which should make the operation of illegal data centers a thing of the past. In addition, the legislation will seek to regulate the amount of electricity directed to and used by the crypto mining industry through quotas.

In Russia, crypto-miners who are not considered entrepreneurs or businesses, are tracked, in the same methodology as in Kazakhstan, by following the electricity footprints of their crypto-farms. They are then roped-in and charged the difference between residential home-use which is billed at a generously low preferred rate that miners understandably prefer, and the business-commercial rates which are far higher.

So far, court cases have been few, but in almost all instances where proof has been presented that the entity has been using their ‘residential’ electricity for crypto mining, the courts have sided with the power companies. By way of fines, they have taken the form of retroactively (from the start of activity) raising the electricity rates to commercial levels, in this way generating very hefty debts owed to their power providers, which if left unpaid will cut off their power, or lead to asset seizures.

Current legislation in Russia does not regulate crypto-mining as a recognized activity. There are efforts being made to remedy this in the upcoming State Duma sessions on fine tuning the complexities of regulating crypto in Russia. One proposed bill that is in process is to fully legalize mining, so that those who do it will have to declare their income on mining and pay their fair share of tax on it. Russia is poised to open cryptocurrency exchanges in Q2 2023.

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