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Sep 5, 2020

New Russian bill: prohibits bitcoin miners from earning bitcoin

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According to a report by the local Russian news media Izvestia on September 4, a new bill submitted by the Russian Ministry of Finance stipulates that it is illegal for minors to accept rewards in cryptocurrencies such as Bitcoin or Ethereum.

According to a copy of the proposal reviewed by Izvestia, if the proposed amendments to the Digital Financial Assets Act take effect, Russia will have only three acceptable circumstances for receiving cryptocurrency: inheritance, bankruptcy, and acquisition of assets through enforcement procedures.

In all other cases, including mining rewards, all operations using cryptocurrency will be considered illegal for Russian citizens and businesses. Residents who violate this proposed law may face fines of up to 100,000 rubles (currently approximately US$1,325) and up to 7 years in prison. Legal persons may face fines of up to 1 million rubles (approximately US$13,250).

The lawyer interviewed by Izvestia pointed out that the amendment requires extensive changes. Efim Kazantsev, the managing partner of the EK&P law firm, described the measures proposed by the Ministry of Finance as “extremely stringent and completely banned the circulation of cryptocurrencies in Russia.”

Other experts also said that although miners may propose some legal framework to continue their activities under the new regulations (because mining itself will still be legal, but financially meaningless), this cannot rule out liability risks.

Russia updated its encryption law in late July. Not as strict as the previous proposal, but by prohibiting the use of Bitcoin to buy goods, assets such as Bitcoin are useless. The law recognizes that digital currency “is a collection of electronic data that can be accepted as a means of payment” and gives it legal status, but adds that it “cannot be used to pay for any goods or services at the same time.”    

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