Russian Finance Ministry Wants to Tax Crypto Miners on Their Energy Use

The Russian Finance Ministry is likely to begin taxing crypto miners based on their electricity usage, rather than the value of their token sales, a top official has claimed.

The state-run news agency TASS reported that Deputy Finance Minister Ivan Chebeskov said on September 18 that his ministry is “considering the launch of an excise tax on electricity for miners.”

Russian Finance Ministry Wants Crypto Tax Rollout

The report claimed that the ministry is “in favor of” a crypto mining tax system that would “initially” take the form of an “indirect tax on the electricity miners consume.”

The media outlet RBC also suggested that the levy would be a stopgap solution before Moscow introduces a tax on miners’ profits.

“Our target remains taxation on profit. This is our long-term goal. We understand that this is, in principle, the correct structure – like everyone else, like any [form of] business. An intermediate system could be based on taxation in the form of excise taxes. However, so far, no decision has been made on this matter.”

Russian Deputy Finance Minister Ivan Chebeskov

Stopgap Solution

Moscow appears to be unsure how to accurately crypto mining calculate profits, particularly if miners are creative with their accounting.

Chebeskov suggested that as miners may not disclose all of their wallets, it would be easier to “estimate their power consumption than the cost of the mined cryptoassets.”

The deputy minister added that the ministry expected MPs to approve a law on crypto mining tax by the end of the State Duma’s autumn session.

Late last year, lawmakers floated the idea of introducing a tax on crypto-related income, rather than profits.

The Treasury Department has floated similar ideas. However, exchange rate calculations may be problematic for such proposals.

Crypto tax-related issues are a hot topic in Moscow. Industry officials have long claimed they are prepared to declare their operations and pay taxes on their earnings.

It was to this end that Moscow finally granted industrial crypto mining legal status this summer.

However, lawmakers at the time said they would tackle the issue of how they would tax miners in a separate bill.

(Reuters) – Russian President Vladimir Putin has accepted the Russian Foreign Ministry's proposal to sign a strategic partnership agreement with Iran, according to Putin's order published on the state website.

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Crypto Exchanges Still Unregulated

Much of the problem revolves around the fact that crypto exchanges have no legal status in Russia, and thus cannot be audited.

Some policy-makers have urged Moscow to respond by green-lighting the construction of state-run crypto trading platforms.

They say these platforms could operate from organizations like the Moscow Exchange and the Saint Petersburg Currency Exchange.

However, both exchanges have denied they have any plans in place to start trading cryptoassets.

Global Crypto Mining Leader?

Earlier this month, President Vladimir Putin said that Russia was “one of the world leaders” in the crypto mining sector.

He added that domestic businesses operating in the sector are “earning lots of money,” and was pivotal in driving the government to its eventual consensus on legalization.

The Kremlin is turning to YouTube to get Putin's message out to the world, even as it’s throttling access for ordinary Russians to the US social media site https://t.co/sF2avRjRf2

— Bloomberg (@business) September 19, 2024

Industrial players have responded to legalization with great zeal: Gazprom, the majority state-run oil and gas giant, is reportedly set to build a 5,000-rig crypto “farm” in Novgorod.

And the regional head of the Russian Komi Republic has announced the construction of 15 new crypto data mining centers.

Industry chiefs claim that crypto mining could bring the Treasury 50 billion rubles ($538.4 million) in tax revenue per year as of 2025.

The Russian Finance Ministry has suggested it is keen to ensure that this quickly becomes the case.

Experts also claim that most Russian miners are still focusing the vast majority of their efforts on Bitcoin (BTC).