Herman Gref, the CEO of Sberbank, discussed ongoing cryptocurrency regulation in Russia during his speech at the “FI day. Blockchain: on the edge of a new financial era” conference, which took place in Moscow on November 12.
According to Gref, legislation banning the use of cryptocurrencies as a payment method within Russia is “not very likely” to change in the near future.
While the Russian government has allowed digital currencies and cryptocurrency for international use, domestic applications remain curtailed.
Russia and its Relationship With Cryptocurrencies
Even with these constraints, Gref said Russia’s central bank digital currency (CBDC), could potentially be used in international transactions if other countries were open to using it.
While cryptocurrency development in Russia has started gaining momentum, it should be noted that all these changes are taking place against a backdrop of global scrutiny.
Over the last 12 months, Russia has also adopted several legislative measures related to regulating the digital asset market, such as rules on taxation and cryptocurrency mining.
The Russian Government Commission on Legislative Activities approved a bill on November 11 that would impose taxes on cryptocurrency transactions through both corporate profit tax and personal income tax systems.
Russia on Crypto Taxes
Russian news outlet Izvestia reports that the bill also includes clauses on mining, which has been regulated since November 1. Originally drafted in 2020 but delayed, the legislation officially defines cryptocurrency as property and lays out clear tax guidelines for all miners, whether individual or business.
The new framework requires companies engaged in crypto mining to register with the Federal Tax Service, while individuals can mine up to 6,000 kilowatt-hours of electricity per month without registering. This amount is about six times the average energy consumption of a typical Russian household.
The tax framework establishes a dual tax system, where individuals are taxed on a personal income basis and businesses are taxed under corporate profit tax law.
Additionally, this system will cover small businesses and self-employed people involved in crypto mining, further increasing government oversight in the industry.
Russia Faces Multiple Sanctions
In response to sanctions from the United States, EU, and the UK, which have severely impacted cross-border payments and access to foreign reserves, the Central Bank of Russia has been exploring ways to integrate cryptocurrencies into the National Payment Card System (NPCS).
The NPCS is a vital component of Russia’s payment infrastructure, managing international payments domestically, and may help alleviate some of the challenges Russia faces in making cross-border transactions due to these sanctions.
With more than 16,500 sanctions imposed on Russia, affecting critical sectors like energy, metals, and diamonds, Russian authorities are increasingly relying on cryptocurrency exchanges to navigate economic challenges.
This move aims to allow Russian businesses and individuals to conduct foreign economic activities despite the West freezing Russia’s foreign currency reserves and imposing various financial restrictions.