Cryptocurrency has come under a lot of focus in the last year. Federal governments around the world are either banning cryptocurrencies and everything related to it, while others are embracing it, making digital currencies/online currencies official legal tenders. However, during all the growth and adoption, one topic that has refused to get off the table, and has stirred a lot of controversies is taxing crypto traders and miners. The Russian government, speaking through the deputy of the Committee on Budget and Financial markets, says that there is a possibility that cryptocurrencies will become a mainstay in Russia.
RUSSIA’S MIXED REACTION TO CRYPTOCURRENCY
The Russian government has had a mixed reaction to cryptocurrencies. While the government banned financial transactions in the country using cryptocurrencies, no thanks to the money laundering crimes committed by some of her politicians, there is no ban for miners. Also, the Russian Prime Minister Vladimir Putin, in an interview in November, said crypto was being considered as a future currency in settling crude oil transactions.
But, the signs from Russia have not been particularly encouraging.
For example, crypto exchanges such as Redot.com are not permitted to work in Russia due to the ban, but miners are still allowed to work in Russia, making Russia an inviting option for miners from China. Remember that China made a final crackdown on anything cryptocurrency-related when the government, in September, outrightly banned miners, traders and investors in China from Cryptocurrency.
The cry for the Russian government to accept cryptocurrency is getting louder as members of the upper house, the Federation Council, state that cryptocurrency might have a future.
For anyone that follows the cryptocurrency space, this news won’t come as a surprise. In October, news media in Russia reported that Russia was considering swapping most of its NWF reserves in dollars to cryptocurrencies.
Elena Perminova, deputy chair of the Federation council’s Committee on Budget and Financial markets, hinted that, despite the volatility of cryptocurrency prices, there might be a future for crypto in Russia. In her words, “…maybe they will amount to something.”
However, one must take words such as this with caution because her next words highlight, again, the scepticism that federal governments around the world have about cryptocurrencies. She said that she doesn’t see cryptocurrencies becoming an official means of settlement by the government yet.
On the optimistic side, there are hopes that as more people clamor for cryptocurrencies to be accepted as a legal tender, governments will see the benefit of adopting cryptocurrencies as official currency.
THE GOVERNMENT IS CRITICALLY ANALYZING THE EFFECT OF CRYPTOCURRENCIES ON THE FINANCIAL MARKET
The Russian government, while still remaining headstrong on their stance on cryptocurrency trading in Russia, are not oblivious of the possible tax returns cryptocurrency could bring to the country. Perminova also added, in the interview with Ura.news, that members of her committee had been tracking cryptocurrency for a while, collecting analytics and weighing the possibility of Russia collecting tax on cryptocurrency trading and mining. She also added that soon, the government will “deal with the issue in a serious manner.”
REGULATIONS FOR CRYPTOCURRENCY
The buzz around cryptocurrency is prompting federal governments worldwide to create laws that will tax miners and traders. The Russian government and the Russian governors of the central bank have been kicking against crypto because they fear that the government is unable to tax miners and traders. They also fear that cryptocurrency, if left unchecked and unregulated, will make the Russian currency lose its value.
The Central Bank’s governor, in a scathing remark, stated that “no responsible government” would allow cryptocurrency to spread in the country.
Elvira Nebiuliina, the Central Bank governor, cast serious doubt on the likelihood of Russia finally accepting cryptocurrency as a legal tender.
While the reports of Russia creating a digital Ruble, there are still worries in the upper and lower house, among parliamentarians, that cryptocurrencies will ruin the Russian economy. The Russian monetary system is heavily dependent on oil sales in the international market, the country’s official currency, the Ruble, is used for payment.
If cryptocurrency becomes a legal tender, the central bank governor fears, the ruble will become useless, and the economy will nosedive, sooner rather than later.
The Central Bank of Russia is headstrong on outrightly banning crypto. Although some top government officials had come out in the past to say Russia wouldn’t follow in the footsteps of China, some are still in favor of the ban. In light of the debate on whether cryptocurrency in Russia should be banned, the lower house set up a committee to deliberate on legalizing mining crypto in Russia, as was announced by the speaker of the State Duma, the lower house.
WHY ARE THEY CONSIDERING LEGALIZING CRYPTO MINING?
The statement from the speaker of the State Duma, the lower house, Vyacheslav Volodin reflects the growing need among parliamentarians to profit off the growing number of miners in the country.
While Russia banned trading on Redot exchange, it did not ban mining. And miners are generally unregulated, therefore leaving them tax-free.
MP Andrei Lugovoy, a member of the State Duma, had said that, from stat he gathered, crypto miners were making up to $2 billion in profit every year.
That is a lot of money to be left untaxed.
So, in responding to this report, the speaker of the State of Duma said that tax regulations would be looked at for miners, given the growing influx of miners from China.
THE AMAZING TWIST
For Russia to tax crypto miners in the country, it means they are recognizing cryptocurrency, legalizing it. If this happens, Russia can effectively create tax laws to tax miners, and by extension, traders.
Chinese miners, all looking for safe countries to mine, following the crackdown in China, are flooding countries such as China, Argentina, Paraguay, and even the United States. If these miners set up shop in Russia, and are taxed, the Russian government will be able to cover a lot of tax deficiencies.
The Federal Tax reserve chief Daniil Egrov said that his agency was seriously looking at crypto, seeking ways to tax miners and traders. Daniil Egrov said the Federal Tax Reserve saw cryptocurrency as a settlement system that could cause massive erosion for the Russian tax base.
