Russia Moves to Ease Cryptocurrency Mining Bans Over Tax Revenue Concerns

Russia's executive authorities have paused an expansion of a ban on cryptocurrency mining that could have added several more regions to the already extensive list of territories where the activity is strictly restricted.

On Thursday, the government in Moscow cancelled or postponed measures to limit electricity consumption by bitcoin miners in regions from the Finnish border to Lake Baikal, citing an expected drop in tax and energy revenues as the main reason for the change.

Russian authorities reconsider ban on cryptocurrency mining

The Russian government has decided to hold off on introducing restrictions on cryptocurrency mining in more regions, putting on hold a planned expansion of the ban that has already affected about a dozen federal subjects.

The change in decision was made at a meeting of the government commission on the development of electric power industry under the leadership of Deputy Prime Minister Alexander Novak and was announced in a message on the Telegram channel of the Cabinet of Ministers on June 5.

According to a press release, the participants considered requests from authorities in several Russian regions for permission to stop mining operations, which local authorities often blame for power shortages and outages.

Meeting of the commission on development of electric power industry. Source: Government of the Russian Federation

The Commission has abandoned its ban on cryptomining activities in the Republic of Khakassia, citing the lack of adequate forecasts for electricity and generating capacity shortages in the region, as well as a decline in tax revenues and distribution income.

During the meeting, proposals to limit mineral extraction made by the governors of the Russian regions of Karelia, which borders Finland in the northwest, and Penza Oblast, located approximately 600 km southeast of Moscow, were withdrawn.

In addition, federal authorities decided to postpone for two months consideration of petitions for a year-round ban on coin minting in the Zabaikalsky Krai, a region in Russia's Far East also known as Transbaikalia, and the neighboring Republic of Buryatia.

The Russian government reported that it “takes into account the need to assess lost income in the electric grid complex” and develop a mechanism for redistributing electricity released by miners “in the interests of socially significant consumers in regions with energy shortages.”

Russia plans to relocate miners to regions with abundant energy resources

Despite its reluctance to allow Bitcoin and similar currencies to circulate freely in its economy, the Russian Federation has recently shown some flexibility towards cryptocurrencies. For example, in late May, the Bank of Russia allowed investments in crypto derivatives.

Mining became the first significant cryptocurrency activity to receive full regulatory recognition after legalization last year. Miners can now legally produce digital coins provided they register with the Federal Tax Service (FTS) and pay taxes.

However, the continued expansion of cryptocurrency mining operations, both on industrial farms and in private basements and garages, has become a source of problems for authorities in some regions, such as the Irkutsk region, which attracts miners with low electricity rates.

The Russian government is currently considering how to entice mining companies to move to regions with excess energy and idle infrastructure, including offering them fuel that cannot be sold to Europe because of Western sanctions related to the war in Ukraine.

At its meeting, the Electric Power Commission recommended:

“The Ministry of Energy and the Federal Antimonopoly Service, together with energy companies, also need to develop economic incentives to attract mining companies to regions with excess electricity and capacity.”

Almost a dozen Russian regions have imposed permanent bans on mining operations until mid-March 2031, after some initially imposed only seasonal restrictions during periods of peak electricity consumption in the cold winter months.

The affected areas include the southern part of the Irkutsk region, the republics of Dagestan, Ingushetia, Kabardino-Balkaria, Karachay-Cherkessia, North Ossetia and Chechnya, as well as the occupied parts of the Ukrainian regions of Donetsk, Lugansk, Zaporozhye and Kherson.

Source: cryptonews.net