The President of the Russian Federation signed a law on the legalization of mining, and the St. Petersburg Stock Exchange and the Moscow Stock Exchange are included in the register of digital financial asset exchange operators. How has the legislation in the field of cryptocurrency and CFA changed? What consequences can this lead to? What needs to be done now? Read the article.
Cryptocurrency mining: what is it and why is legalization important?
Until recently, the term "mining" did not exist in the legislation, and the release and creation of digital assets was regulated by Federal Law 259-FZ of 07/31/2020 on digital assets and currency. According to this law, cryptocurrency transactions were not officially allowed, but they were not prohibited either. LLC and Individual Entrepreneur could:
On August 8, when Russian President Vladimir Putin signed Federal Law No. 221-FZ dated 08.08.2024 on the legalization of mining, many of the provisions of which will enter into force in November 2024. The new law both defined the term and made significant adjustments to the regulation of the issuance and creation of digital assets.
According to the new law, mining is an activity in an information system that aims to create its own digital currency.
According to the new law, mining can be carried out by both LLC and Individual Entrepreneur, as well as individuals.
Mining of cryptocurrencies is entrepreneurial in nature for LLC and Individual Entrepreneur: mining and owning digital assets provides an opportunity to make a profit.
From November 1, 2024, businesses will be able to officially conduct transactions with Russian and foreign cryptocurrencies (art. 5 221-FZ). It is important to note that special conditions apply to foreign digital assets, which will become known after the release of regulatory regulations by the Government and the Central Bank.
Another significant change is the necessity to include a mining company in a special register (art. 5 221-FZ). The registry will be formed and maintained by the Ministry of Finance.
Individuals will be able to mine cryptocurrency without being included in the register if they do not exceed the energy consumption limits set by the Government of the Russian Federation.
It will be necessary to report on the receipt of cryptocurrency as a result of mining: LLC and sole proprietors will notify a special body, which will be determined by the government. The notification must specify the address-identifier — a unique sequence of characters to account for the transactions of LLC / Individual Entrepreneur with cryptocurrency.
Businesses cannot combine cryptocurrency mining with the transmission, production or purchase and sale of electricity. It will also prohibit the combination of mining with operational dispatch management in the electric power industry.
Who will ensure the conclusion of transactions with the digital financial assets?
At the moment, the Central Bank has included the Moscow Stock Exchange and the St. Petersburg Stock Exchange in the register of digital financial asset exchange operators.
Exchange operators can make transactions with digital financial assets issued both in their own and in other information systems through the collection and comparison of multidirectional applications. They can interact with several information system operators that issue digital rights. This increases the investment attractiveness and liquidity of financial products.
Also in July, the State Duma passed a law ordering operators of digital financial assets to block funds from companies controlled by foreign organizations and citizens against whom Russia applies restrictive measures.
Cryptocurrency and Digital Financial assets: taxation
Income from transactions with cryptocurrencies is taken into account in the tax base for income tax, simplified taxation system and personal income tax, this is explained by the fact that cryptocurrency is a digital currency that is not a non—cash monetary instrument and a digital ruble. Therefore, cryptocurrency can be considered as an investment, a means of payment that is not a monetary or settlement unit, or other intangible property (Article 128 of the Civil Code of the Russian Federation), which is property for tax purposes (paragraph 2 of Article 38 of the Tax Code of the Russian Federation).
The right to cryptocurrency arises from the moment when an entry about the transfer of digital currency to an electronic wallet appears in the information system. The right to cryptocurrency is confirmed by a unique digital code.
Transactions for the purchase and sale of cryptocurrencies are formally subject to VAT — legal entities applying the general taxation system must pay this tax now. For sole proprietors, the taxation of the purchase/sale of cryptocurrencies depends on the applicable tax regime. However, we remind you that starting from January 1, 2025, business entities applying the simplified taxation system are also VAT payers.
It is important to note that some companies have an alternative point of view on the issue of VAT and do not think that they should pay this tax. This approach can be called risky: you will most likely have to defend your point of view in court, and due to the lack of practice in the matter, there is a high probability that the courts will side with the Federal Tax Service.
Cryptocurrency and digital financial assets are in increasing demand among both companies and individuals. The rapid changes in legislation in this area are not only business opportunities, but also challenges. Acsour experts regularly study innovations and are ready to advise you on legal issues of cryptocurrencies and digital financial assets.
Cryptocurrency mining: what is it and why is legalization important?
Until recently, the term "mining" did not exist in the legislation, and the release and creation of digital assets was regulated by Federal Law 259-FZ of 07/31/2020 on digital assets and currency. According to this law, cryptocurrency transactions were not officially allowed, but they were not prohibited either. LLC and Individual Entrepreneur could:
- to issue cryptocurrency;
- sell and invest;
- to give and inherit;
- use digital financial assets as collateral;
- conduct other civil transactions with cryptocurrency.
On August 8, when Russian President Vladimir Putin signed Federal Law No. 221-FZ dated 08.08.2024 on the legalization of mining, many of the provisions of which will enter into force in November 2024. The new law both defined the term and made significant adjustments to the regulation of the issuance and creation of digital assets.
According to the new law, mining is an activity in an information system that aims to create its own digital currency.
According to the new law, mining can be carried out by both LLC and Individual Entrepreneur, as well as individuals.
Mining of cryptocurrencies is entrepreneurial in nature for LLC and Individual Entrepreneur: mining and owning digital assets provides an opportunity to make a profit.
From November 1, 2024, businesses will be able to officially conduct transactions with Russian and foreign cryptocurrencies (art. 5 221-FZ). It is important to note that special conditions apply to foreign digital assets, which will become known after the release of regulatory regulations by the Government and the Central Bank.
Another significant change is the necessity to include a mining company in a special register (art. 5 221-FZ). The registry will be formed and maintained by the Ministry of Finance.
Individuals will be able to mine cryptocurrency without being included in the register if they do not exceed the energy consumption limits set by the Government of the Russian Federation.
It will be necessary to report on the receipt of cryptocurrency as a result of mining: LLC and sole proprietors will notify a special body, which will be determined by the government. The notification must specify the address-identifier — a unique sequence of characters to account for the transactions of LLC / Individual Entrepreneur with cryptocurrency.
Businesses cannot combine cryptocurrency mining with the transmission, production or purchase and sale of electricity. It will also prohibit the combination of mining with operational dispatch management in the electric power industry.
Who will ensure the conclusion of transactions with the digital financial assets?
At the moment, the Central Bank has included the Moscow Stock Exchange and the St. Petersburg Stock Exchange in the register of digital financial asset exchange operators.
Exchange operators can make transactions with digital financial assets issued both in their own and in other information systems through the collection and comparison of multidirectional applications. They can interact with several information system operators that issue digital rights. This increases the investment attractiveness and liquidity of financial products.
Also in July, the State Duma passed a law ordering operators of digital financial assets to block funds from companies controlled by foreign organizations and citizens against whom Russia applies restrictive measures.
Cryptocurrency and Digital Financial assets: taxation
Income from transactions with cryptocurrencies is taken into account in the tax base for income tax, simplified taxation system and personal income tax, this is explained by the fact that cryptocurrency is a digital currency that is not a non—cash monetary instrument and a digital ruble. Therefore, cryptocurrency can be considered as an investment, a means of payment that is not a monetary or settlement unit, or other intangible property (Article 128 of the Civil Code of the Russian Federation), which is property for tax purposes (paragraph 2 of Article 38 of the Tax Code of the Russian Federation).
The right to cryptocurrency arises from the moment when an entry about the transfer of digital currency to an electronic wallet appears in the information system. The right to cryptocurrency is confirmed by a unique digital code.
Transactions for the purchase and sale of cryptocurrencies are formally subject to VAT — legal entities applying the general taxation system must pay this tax now. For sole proprietors, the taxation of the purchase/sale of cryptocurrencies depends on the applicable tax regime. However, we remind you that starting from January 1, 2025, business entities applying the simplified taxation system are also VAT payers.
It is important to note that some companies have an alternative point of view on the issue of VAT and do not think that they should pay this tax. This approach can be called risky: you will most likely have to defend your point of view in court, and due to the lack of practice in the matter, there is a high probability that the courts will side with the Federal Tax Service.
Cryptocurrency and digital financial assets are in increasing demand among both companies and individuals. The rapid changes in legislation in this area are not only business opportunities, but also challenges. Acsour experts regularly study innovations and are ready to advise you on legal issues of cryptocurrencies and digital financial assets.
