A month after Russia's President Vladimir Putin gave the go-ahead to the Digital Financial Assets (DFA) law, a potential reform is now looming that would legalize Bitcoin mining, but ban the incentives miners receive for your activity.

The Ministry of Finance proposed a set of amendments to the law that would prohibit all cryptocurrency transactions, limiting their use to three areas: inheritance, bankruptcy-related operations, and court executions.

Local media pointed out that the intention of the reform is to legalize Bitcoin mining, however, miners could not receive the remuneration as they would risk being fined up to 100,000 rubles ($ 1,300) and be sentenced to seven years in prison. . In the case of legal persons, the fine would amount to 1 million rubles ($ 13,000).

Dmitry Sakharov, CEO of the Moscow Digital School, commented that the situation is complex and it is unclear how miners would receive the incentives. "Experts may try to come up with some interesting legal structures, but all of them will carry significant risks of applying administrative (fines) and criminal (imprisonment) liability."

The intention to modify the recently approved law is contradictory since cryptocurrency mining is sustained precisely by the incentives that miners receive as a return on their investment. If the direct payment of incentives is prohibited, an uncertainty is created since it is unknown what would be the mechanism to compensate for the work carried out to maintain the network.


Quoted by digital means, lawyer Anton Babenko specified that it would be "difficult to say how the rules that allow the use of mining equipment in Russia prohibit receiving payment in digital currency."

In this regard, it is possible to speculate a scenario in which the miners continue to develop their work (those who accept), but the bitcoins of the rewards go to wallets controlled by the government. In theory, the authorities would receive the funds, deduct taxes, distribute the rewards and encourage activity in the country.

The problem could arise if transparency guarantees are not presented in the allocation of resources, which would generate corruption. Furthermore, the government would not be obliged to transfer the bitcoins either as it could decide to send fiat money instead of the cryptocurrencies.

Interestingly, Jakhon Khabilov, head of the Sigmapool mining consortium, told digital media that in Russia only the smallest mining farms accept payment in cryptocurrencies. The largest receive payment in fiat currency through bank transfers.

It should be mentioned that, according to the record kept by the University of Cambridge, Russia is the third country in the world with the highest processing power in the Bitcoin network with almost 7% hash rate. They are followed by the Russian Federation: China with 65% and the United States with 7.2%.

The regulations that Russia applies to bitcoin and cryptocurrencies in general are generating more confusion about what is the legislative tone with which they are assumed. The country recognizes Bitcoin legally, but maintains prohibitions to use it as a payment method.

The government classifies it as an investment mechanism that is only accessible to qualified operators, in accordance with the provisions issued by the central bank.

Other regulations that could be passed include that mining farms must report their operations to the national government. Processing centers must disclose their computing capacity, how the data is stored, what their services are, and what the operating cost is.