by Joseph Young
According to a series of orders translated by Motherboard, Russian President Vladimir Putin has tasked the Russian government to introduce regulatory frameworks around bitcoin and cryptocurrencies by mid-2018. Specifically, Putin requested the impose a licensing program for cryptocurrency miners, requiring them to register with the government within the next 12 months.
Purpose of Mining Regulations: Taxing Miners
Most major bitcoin and cryptocurrency markets such as China, Japan, South Korea, and the US have not introduced or imposed any sort of regulations on bitcoin and cryptocurrency miners, mining equipment manufacturers, and mining center operators.
Even in China, the majority of large-scale mining pools and centers have been continuously operating, subsequent to the government’s imposition of a nationwide ban on initial coin offerings (ICOs) and cryptocurrency trading. At the time of reporting, China-based Bitmain’s Antpool, BTC.com, and ViaBTC remain as the three largest mining pools in the global market according to data from blockchain.info.
However, contrary to the regulatory roadmap of other countries concerning cryptocurrencies, Putin has requested the Russian government to regulate the local bitcoin and cryptocurrency mining industries. By July 2018, bitcoin miners will be required by law to register with the government, primarily for tax purposes.
As BTCManager previously reported, the global bitcoin mining industry is expected to generate more than $4 billion in annual revenue starting this year. Chris Burniske, a prominent crypto-analyst, the founding partner at Placeholder VC and former lead at ARK Invest, further emphasized that the industry has been growing at a rapid rate and in the upcoming years, the revenues and profit margins of the mining industry will likely increase exponentially.
Essentially, Putin and the Russian government has acknowledged the surge in the interest and demand for bitcoin mining from Russian entrepreneurs, who are looking toward using the country’s cheap electricity to mine cryptocurrency at a more efficient rate than other regions.
In September, governor of the Leningrad region Alexander Drozdenko encouraged bitcoin miners to create, develop and deploy mining centers in Leningrad at the third annual Energy of Opportunities conference.
“As you know, the construction of LNPP-2 is being completed in Sosnovy Bor, and large areas of the first nuclear power plant are being liberated. Production sites that are being released during the construction of new power units of the Leningrad nuclear power plant will be available for new residents as early as 2018,” said Drozdenko.
Regulations For ICOs: Securities or a New Asset Class
Furthermore, Daniel Oberhaus of Motherboard reported that Putin tasked Russian Prime Minister Dmitry Medvedev and Central Bank of Russia head Elvira Nabiullina to introduce methods of regulating the Russian ICO market. As of current, the legality of ICOs remain unclear in the region, and over the next few months, the Central Bank of Russia will investigate whether to regulate ICOs as securities or acknowledge ICO tokens as a completely new asset class.
There exists a high probability that certain ICOs will be classified as securities while others could be categorized as a new asset class. For instance, hundred million dollar ICOs such as Tezos have described their ICO funds as “non-refundable donations” that do not have any purpose. For such tokens, it would be challenging for the Russian government to regulate them as securities or commodities since, in theory, they are donations.