Russia legalizes cryptocurrency mining as global sanctions rattle traditional finances

Russia’s government passed two laws on Tuesday that legalize virtual currency mining and pave the way for its central bank to use crypto for international payments.

The lower house of the Russian parliament, the State Duma, has approved cryptomining for legal entities and entrepreneurs. Those interested need to submit their information to relevant Russian agencies so that they can be tracked, according to the new rules. 

Individuals who stay within government-set energy limits can mine without registration. The government will also be able to ban mining in certain regions of Russia.

According to the law, miners will be required to report their activity to the local financial monitoring service and provide the addresses of their wallets to Russia’s security services.

A separate crypto bill, expected to come into force in September, would allow Russia’s central bank to create an “experimental” infrastructure for using cryptocurrencies in cross-border payments. According to the current rules in place, the use of digital currency for payments is prohibited in Russia.

The new crypto regulation is being introduced as global sanctions imposed on Moscow following its invasion of Ukraine continue to take a toll on Russia’s economy. The sanctions isolated Russian companies from the global dollar system and forced the Moscow Exchange to stop trading in U.S. dollars and Euros.

One of the authors of the crypto bill, Anton Gorelkin, who serves as deputy head of the committee on information policy, said that Russian authorities view cryptocurrencies “primarily as a tool for circumventing sanctions.”

Russia’s attitude toward cryptocurrencies has evolved over time and earlier this month, Russian President Vladimir Putin called digital currencies "a very dynamic and promising direction of the modern economy."

“It is important for us not to miss the moment and promptly set up the legal framework and regulation, develop infrastructure, and create conditions for the circulation of digital assets, both within the country and in relations with foreign partners,” he added.

Many limits still prevent the local crypto industry from growing. The new law will not lift the existing ban on cryptocurrency payments inside Russia. Additionally, advertisements for cryptocurrencies and companies offering crypto services remain prohibited in the country.

Putin also blamed cryptominers earlier this month for the shortage of electricity in Buryatia and the Irkutsk region. Russia’s Ministry of Energy even proposed increasing tariffs for miners by five to ten times to avoid a deficit.