State Duma, the Russian parliament’s lower house, has adopted two laws that approve crypto mining for businesses and experimental use of cryptocurrencies for international payments. Interested legal entities will be required to register with the authorities to take advantage of the new legal regime.
On the one hand, the legalization of crypto mining is a great victory and a serious shift from the Central Bank’s rhetoric from three years ago and its negative stance on the growing crypto industry, says Alexander Shneiderman, head of sales and client support at Alfa-Forex.
Industrial mining has already taken shape in Russia, becoming strong competition to the US. Predictably, this gave a boost to the development of digital currencies and high technologies, effectively paving the way for the advancement of AI and end-to-end technology projects. The country’s Ministry of Finance and Ministry of Digital Economy have been repeatedly calling for legalizing crypto, the expert recalls. However, although official legit miners were building facilities in regions where they had presence, creating jobs, signing grid connection agreements and paying taxes and duties, part of government agencies preferred to ignore an entire new industry already in place.
“The adoption of the new legislation is a huge leap. New regulations will be developed for miners; interested players are required to register already. This runs the risk of the industry being over-regulated, with compulsory reporting to the Finance Ministry, the financial monitoring service and other watchdogs, but for now, what we see from the industry regulators is a balanced approach,” Alexander Shneiderman believes.
However, while businesses will now have the opportunity to transact internationally via crypto, advertisements for this type of financial activity as well as the actual use of crypto for payments remain prohibited in Russia, the expert adds:
“With these bans, the Bank of Russia continues to protect banks’ and payment systems’ monopoly on overseeing transactions inside the country, and it is doing the right thing.”
“The adoption of the mining law marks a number of significant changes.
Firstly, the structure of Russian crypto mining is likely to change, with the share of bitcoin and ether decreasing and that of stablecoins rising because they are much more convenient to use for cross-border trade due to their lower volatility.
In addition, the cryptocurrency infrastructure will account for a greater share of Russia’s crypto market operation – which will be significantly more legitimate once the bills become laws – and accordingly, will gain bigger profits. Banks and other conventional financial market players will be highly unlikely to fight for this business niche, fearing sanctions and their consequences.
Finally, we can predict heightened pressure from the financial authorities of unfriendly countries on crypto exchanges, issuers of stablecoins (where they exist) and miners in order to prevent crypto assets mined in Russia, or by Russian residents, from entering the global crypto market. Blockchain, which is the underlying technology for all crypto assets, generally allows tracking a token’s transactions history from its origin.”
This analysis of the situation was provided by Professor Artem Genkin, author of two best-selling books on distributed ledger technology (blockchain).