Illegal Crypto Miners Threatened With Jail Time in Russia

Cryptocurrency miners that are illegally connecting their equipment to the power grid should go to prison, says a Russian lawmaker who recently announced that his nationalist party is working on draft legislation to regulate the crypto activity. The industry cannot rely on support from the state, another high-ranking parliamentarian has added.

The issue of regulating cryptocurrency mining is looming in Russia and lawmakers have been actively discussing the topic. Andrey Lugovoy, member of the lower house of parliament, the State Duma, has threatened miners with jail if they plug their hardware into the electrical grid without official permission.

If mining is to become legal, the deputy noted, miners should turn to the respective utility before powering up their devices. And if they are denied access but nevertheless connect to the distribution network, they will be in violation of both the Administrative and the Criminal code of the Russian Federation, he explained.

Lugovoy revealed in November that the Liberal Democratic Party of Russia, the nationalist faction he belongs to, is preparing to introduce a draft law to regulate crypto mining. The adoption of the legislation will benefit Russian citizens, the state itself, as well as entrepreneurs who want to get involved in the business legally, the lawmaker insisted.

Speaking to the Russian online news portal Lenta.ru, he has now added that regulating mining makes sense. Besides imposing differentiated electricity rates for mining companies, the deputy believes their profits should be taxed after deducting the cost of the consumed energy and other expenses such as labor. Lugovoy accused miners of using cheap, subsidized electricity without paying taxes.

Bitcoin miners should not expect support from the government as their activity has “no social significance.” That’s according to a statement by the head of the parliamentary Financial Market Committee, Anatoly Aksakov, who also commented on the matter. The high-ranking lawmaker is a proponent of regulating mining as an entrepreneurial activity and its taxation as such.

Aksakov announced that the Duma will host the first meeting of a working group on cryptocurrency regulation in December. It will launch with a review of a special report prepared by the Central Bank of Russia (CBR) and its members will focus on expanding the legal framework for cryptocurrencies. The Russian law “On Digital Financial Assets” regulated only some crypto-related activities earlier this year and mining was not one of them.

Amid an ongoing crackdown on bitcoin mining in China, energy-rich Russia has become a major destination for mining enterprises, having received the bulk of Chinese mining machines during the miner exodus this year, according to a recent report. Members of the crypto industry believe that moderate regulations could help the country become a leader in the sector. However, authorities in regions such as Irkutsk, which has some of the lowest electricity rates in the country, have complained that excess consumption by illegal miners is causing power shortages.

Do you think Russia will regulate cryptocurrency mining in the near future? Share your expectations in the comments section below.