Russia floats fines and seizures as punishment for illegal miners and crypto payments

Authorities in Russia prepare to slap hefty fines on miners minting digital currencies outside the law, following the recent bust of large-scale illegal mining operations in Siberia.

The penalties will be introduced through legislative changes, the authors of which have also taken the opportunity to target the use of cryptocurrencies for payments. In both cases, offenders may expect to have their coins seized by the state.

‘Gray’ miners to pay up to 2 million rubles for breaking the law

The Russian government intends to go after illegal mining activities believed to be causing energy shortages and power grid breakdowns in a number of regions. Moscow wants to punish the so-called “gray” miners with serious fines and confiscation of the mined crypto.

According to amendments to the country’s Code of Administrative Offenses drafted by the Ministry of Digital Development, companies involved in such operations will pay the state between 1 million and 2 million rubles ($25,000), the Russian-language edition of Forbes unveiled this week.

Penalties for individual entrepreneurs and officials will range from 200,000 to 400,000 rubles ($5,000) while private citizens mining in their basements and garages will be fined between 100,000 and 200,000 rubles ($2,500), the article detailed.

The existence of the bill, which is yet to hit the floor of the State Duma, the lower house of the Russian parliament, was confirmed by Anton Gorelkin, deputy chairman of the parliamentary Committee on Information Policy, IT and Communications.

Speaking to the business news portal RBC on Wednesday, the lawmaker revealed that the legislation stipulates the seizure of the illegally minted cryptocurrency, insisting that the changes should be approved “as soon as possible.”

Russia seeks to impose ‘painful penalties’ for crypto payments

The authors of the draft law have also sneaked in a text imposing similar monetary punishments and coin confiscation for any citizen or business using cryptocurrencies for payments outside Russia’s special legal regime that allows limited crypto settlements in foreign trade.

In this case, fines may reach 1 million rubles for companies, 400,000 rubles for officials trespassing the law, and 200,000 rubles for ordinary Russians using Bitcoin and the like to buy goods and services instead of spending the only legal tender in Russia, the ruble.

This kind of liability is “quite tough” against the general background of the code, Director Bank of Russia’s legal department, Andrey Medvedev, admitted in May, while emphasizing:

“But the key thing is that the digital currency that will be illegally used as a means of payment will be confiscated. This will be the most painful phenomenon.”

Large illegal mining farms busted in Siberia

Crypto mining was legalized in Russia last year. Legal entities and entrepreneurs engaged in the business are required to register with the Federal Tax Service, while private persons can mine without registration as long as their monthly electricity consumption does not exceed 6,000 kWh.

Russian miners are also obliged to report the mined cryptocurrency to the Federal Financial Monitoring Service (Rosfinmonitoring), and failure to do so will also result in financial fines in the future.

Growth in the industry has caused energy deficits in parts of the country, and the government in Moscow has already imposed a blanket ban on mining in 11 Russian regions, from the Far East to the Caucasus and the occupied territories of Ukraine.

However, Duma member Anton Gorelkin is convinced that illegal crypto farms are the ones to blame for the excessive load on Russia’s power grids. The current mining prohibition does little to combat them, he said, noting that the restrictions primarily affect “white” miners.

His statements and the news of the heavier penalties for illegal mining come after the discovery of two of the largest “gray” mining farms to date in Irkutsk earlier in June. Law enforcement officials found and seized a total of more than 4,700 mining devices operating at two separate sites in the Siberian Oblast, which has banned mining in its southern half.

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