Last week, information surfaced that the Russian Ministry of Mass Media is developing a special system that is capable of identifying crypto miners and their mining activity. The system in development is for determining how much tax crypto miners will pay. In addition to this, Russian regulators are in the process of creating a cryptocurrency mining bill.
Sources familiar with the cryptocurrency mining bill say that the special system will be able to identify miners by monitoring Internet traffic, energy use and the mining capacity of equipment in use. Additionally, the system will be used to know the number of cryptos a miner declares at an exchange. It is expected that the mining bill will be tabled to the State Duma at the start of February.
The Feasibility of Russia’s Cryptocurrency Mining Bill
According to the Russian Ministry of Energy, it is technically possible to identify and track cryptocurrency mining. Russia’s Energy Ministry is raising concern over the economic feasibility of the bill. While the system can identify mining activity, enforcing the bill will be economically viable through the monitoring of largescale mining nodes.
Some challenges need addressing before passing the bill into regulation. How will the authorities identify cryptocurrency accounts that are earning from that used for daily activities such as watching TV or heating the apartment? Experts are claiming that it will be challenging to determine whether an individual is mining cryptos or downloading videos.
Tax Holidays, Energy Quotas, and Special Tariffs
The Russian Ministry of Communication has been emphasizing the importance having cryptocurrency mining bill. The ministry is also planning to provide special benefits to crypto miners.
Individuals carrying out cryptocurrency mining in Russia will have a two-year tax break. During this time, miners will not pay tax but keep compulsory accounting or bookkeeping records. After the tax holiday comes to an end, miners will pay income tax on the profits made. Crypto miners will however not pay for VAT (value added tax.)
Currently, Russia has one of the lowest electricity tariffs in the world making the cost of computing cheaper in comparison to other nations, making coin mining a lucrative venture.