Russia Plans to Ban Crypto Mining on Public Blockchains

Russia, crypto, cryptocurrency

By HVY Journalists: The State Duma, Russia’s Parliament, is considering placing a ban on decentralized crypto mining and imposing a fine on the violators of the proposed prohibition.

‘You can buy Bitcoin, but not in Russia’

In addition to crypto mining, the Russian government may deem all public blockchain cryptocurrency operations illegal, State Duma Committee on Financial Markets Chairman Anatoly Aksakov told news agency TASS.

“I note that actions with cryptocurrency, unconditional due to Russian legislation, will be considered illegitimate. This means that mining, organizing production, circulation, creating exchange points for these [cryptocurrencies] will be prohibited. For this, administrative liability will be in the form of a fine. We believe that cryptocurrencies created on open blockchains – bitcoins, ethers, etc., are illegitimate tools, ” Aksakov stated.

While the Russian government plans to ban all activities related to decentralized digital currencies, Aksakov stated that holding such coins would be legal, but Russians will have to use foreign cryptocurrency exchanges to buy the assets.

In the same interview, Aksakov told the Russian magazine that the government’s crypto regulation bill, which was postponed in March due to FATF requirements, will be passed in June.

Russia’s ‘scolding’ stance on crypto

In the past, multiple high-ranking Russian government officials had been bashing digital currencies.

Nikolay Arefyev, the deputy chairman of the State Duma committee on economic policy, warned in May that cryptocurrencies could lead to Russia’s collapse as it takes out the control from the government’s hands.

Arefyev also stated that digital assets are too speculative and shady, suggesting to ban cryptocurrencies at all.

Russian President Vladimir Putin had also expressed similar views on cryptocurrencies. In 2017, Putin said that bitcoin attracts criminals due to the “anonymity” the coin provides to its users.

“[The risks include] opportunities to launder funds acquired through criminal activities, tax evasion, even terrorism financing, as well as the spread of fraud schemes,” the Russian president said.

Is starting a war a wise choice?

Now with banning crypto mining and other activities related to decentralized coins, Russia has officially started a war against digital assets. But will this be worth for the State Duma?

According to a July 2018 report by the Russian Association of Cryptocurrencies and Blockchain (RACIB), Russia has a six percent share in the digital currency mining market. The report states that 75,000 companies in the country are engaged in crypto mining with the number increasing by 15% at the time.

As soon as Russia introduces its new ban, a part of those firms will decide to move their operations to another country where cryptocurrency mining is legal.

As a consequence, the government will miss out on the taxes that it could have collected from the digital currency mining enterprises. And as the ban prohibits other activities too, Russia will also see other companies – such as crypto exchanges – relocating and paying their taxes in other countries.

So unless this ban is a part of a “secret scheme” where the government will replace private crypto operations with its own, I’d doubt that this prohibition will do any good for Russia’s economy.