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.”

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BitMEX Slammed as Roubini Raises the Stakes in War Against Crypto

Neil Dennis

Every new concept has its critics and there's none so vehemently opposed to cryptocurrencies as New York University academic Nouriel Roubini, who has just taken his most vicious swipe yet at the emerging asset class.

In an essay entitled "The Great Crypto Heist", published this week on the website Project Syndicate, the NYU Stern Business School professor accuses financial regulators of "being asleep at the wheel" while an army of unregulated exchanges, propagandists and scammers commit "rampant fraud and abuse".

He singles out crypto-derivatives exchange BitMEX as being a particular threat to retail investors. Roubini clashed earlier this month with Arthur Hayes, the chief executive of BitMEX.

Regulation

But first, the professor explains why the sector needs to be more closely monitored. The broader financial sector came under increased regulatory scrutiny following the 2008 financial crisis, to protect investors and society. 

The regulatory regime does not capture cryptocurrencies, however, which are launched and traded outside the domain of official financial oversight, he says.

The result is that crypto land has become an unregulated casino, where unchecked criminality runs riot.

BitMEX

He rounds on BitMEX, registered in the Seychelles, which offers highly-leveraged bets on the rises and falls of cryptoassets: products more broadly known as derivatives.

These investment products have come under the microscope of regulators in many countries. The UK's Financial Conduct Authority would like to ban the sale of cryptoasset derivatives and exchange-traded notes to retail customers, saying they are too difficult to value and are prone to extreme price movements due to the volatile moves of the underlying cryptoassets.

Other global regulators have made moves to reduce the amount of leverage offered by crypto-derivatives exchanges. Roubini points out that with a 100-1 leverage, even a 1% price move in the underlying assets could trigger a margin call that wipes out the investor's entire account and leave them owing the exchange.

Hayes, boasted openly that the BitMEX business model involves peddling to 'degenerate gamblers' (meaning clueless retail investors) crypto derivatives with 100-to-one leverage.

BitMEX aslo runs a proprietary trading desk - an internal, for-profit desk that trades cryptocurrencies with its own money - that has been accused of front-running its own clients, Roubini asserts. He adds:

Hayes has denied this, but because BitMEX is totally unregulated, there are no independent audits of its accounts, and thus no way of knowing what happens behind the scenes.

Perhaps his most grand accusation in the essay, however, is that exchange is being used for criminal activity:

BitMEX insiders revealed to me that this exchange is also used daily for money laundering on a massive scale by terrorists and other criminals from Russia, Iran, and elsewhere; the exchange does nothing to stop this, as it profits from these transactions.

Tiff in Taipei

Roubini accused Hayes this month of holding back the broadcast of a video recorded of their clash at conference in Taipei - to which Hayes had secured exclusive right to.

In the essay, he continues this accusation, saying:

I suppose this is par for the course among crypto scammers, but it is ironic that someone who claims to represent the 'resistance' against censorship has become the father of all censors now that his con has been exposed.

Crypto Cancer Metastasized

In his final dig at the industry, Roubini says crypto trading has created a multi-billion dollar industry that does not just include the exchanges, but also "propagandists posing as journalists, opportunists talking up their own books and lobbyists seeking regulatory exemptions.

It is time global regulatory bodies stepped in, he concludes:

So far, regulators have been asleep at the wheel as the crypto cancer has metastasized. At a minimum, Hayes and all the others overseeing similar rackets from offshore safe havens should be investigated, before millions more retail investors get scammed into financial ruin.

So far, Hayes appears to have remained silent following the article's publication. No activity on his Twitter account. But the ball is now firmly in his court as the war of words heats up.