Russia's Lawmakers Remove Definition of Mining From Crypto Regulations Draft Bill

  • The definition of cryptocurrency mining has reportedly been removed from Russia's regulatory bill on digital assets.
  • Russia's crypto bill has not been officially approved yet, as it's expected to be reviewed again in the next State Duma meeting on crypto regulations.

Russian lawmakers have reportedly removed the section that defines cryptocurrency mining from the country’s draft bill on digital asset regulations.

According to a local news outlet, the Interfax, the crypto-related bill’s next reading, or review, in the State Duma may now fail to clearly specify how Russian citizens are expected to file taxes on their earnings from mining.

Anatoly Aksakov, the chairman of the State Duma Committee on Financial Markets, explained why he thinks the Russian lawmakers have removed the term mining from Russia’s crypto regulations draft. Aksakov noted: 

Earlier we had some thoughts on Bitcoins, on their integration into our economic system. But as we decided we don’t need them, these ambiguous Bitcoins, therefore we don’t need mining as well.

Anatoly Aksakov

Mining Is "Senseless"

The seasoned Russian politician added that if a legal framework, or guidelines, for mining are to be developed, then they will also require that lawmakers define, or categorize, crypto assets. However, Aksakov thinks this is “senseless” as mining is not a legitimate business or industry.

If/when required, Russia’s tax authority will specify how to report taxable income from cryptocurrency mining, Aksakov noted.

It is currently unclear whether Russia’s bill still includes sections that formally define crypto tokens and initial coin offerings (ICO). It is also not clear at press time if the initial draft has any proposed rules in place regarding the operations of cryptocurrency exchanges.

The current version of the proposed crypto bill will now be officially reviewed in the Duma for the second time. Russian lawmakers refer to the crypto-related bill as “Digital Financial Assets” and first introduced it in January of 2018.

"Cryptocurrency" Removed From Bill In May

In March, a group of lawmakers from the Russian Ministry of Finance proposed adding a section on anti-money laundering (AML) and know-your-customer (KYC) guidelines to the bill - which has now become almost a standard requirement in the US.

In May, a basic draft of the crypto bill had been approved by the State Duma, however, the definition of “cryptocurrency” was removed by lawmakers before the (next) autumn session. At the time, mining was still included in the bill and defined as the “release of tokens to attract investment in capital.”

In September, lobbyists from the Russian Union of Industrialists and Entrepreneurs (RSPP) began preparing their own version of the cryptocurrency regulation bill. Elina Sidorenko, the vice president of RSPP, explained that the bill had categorized crypto assets into three distinct groups, in order to bring more clarity as the bill presented in the State Duma was considered to be “unfinished and unfragmented.”

Unregulated Crypto Derivatives Exchanges Dominate Regulated Alternatives

Trading volume on unregulated Bitcoin (BTC) derivatives exchanges is growing rapidly, and continuing to far outpace their regulated-institutional counterparts, according to the most recent (March) CryptoCompare Exchange Review.

unregulated exchange volume(source: CryptoCompare)

Both OKEx and bitFlyer exchanges hosted an average daily derivative trading volume worth well over a billion dollars during March - $1.5 billion and $1.14 billion respectively according to CryptoCompare. It seems then that the older derivative stalwart BitMEX, at $645 million daily average volume, has been rapidly eclipsed by the newer exchanges.

regulated exchange volume(source: CryptoCompare)

Institutional, fiat-dealing (regulated) exchanges hosted a fraction of this volume, the highest being $70.5 million on the CME exchange. CryptoGlobe reported last month the CME’s primary competitor, the CBOE, was shuttering its Bitcoin futures products citing low demand. CME volume spiked last month, but is down this month below to January levels.

However, despite the relatively low average volume, the CME did have one bumper day of record-breaking Bitcoin futures trading volume, trading nearly $550 million worth of bitcoin on April 4th - days after Bitcoin’s unbelievable breakout from its $4,200 resistance.

Outflanked

The ease of onboarding new customers may explain why the unregulated exchanges get more attention.

In a recent interview, BitMEX CEO Arthur Hayes underlined his exchange’s ability to “onboard a [new] customer within 10 minutes,” by accepting Bitcoin and only Bitcoin for funding. In addition, no KYC/AML checks are required to trade on BitMEX, merely an email address; whereas OKEx offers margin trading only after basic KYC/AML checks. These exchanges are registered in Seychelles and Malta, respectively, specifically to avoid such onerous accounting requirements for their customers.

As CryptoGlobe covered early in 2019, however, BitMEX and other derivative exchanges including OKEx officially exclude certain citizens from trading on their platforms due to regulatory concerns, most notably US citizens.

Hayes also intimated at the upcoming launch of an interest bearing Bitcoin-only bond, which he speculated could be used to leverage credit into future Bitcoin-denominated economic activity.