“Mining is outside the legal field” – Newspaper Kommersant No. 16 (7461) dated 01/30/2023

The founder of BitRiver told Kommersant about what kind of regulation is required for Russian mining Igor Runets.

— How does the mining data center business work?

— In the absence of regulation and a transparent taxation procedure, industrial data centers for mining operate on a hosting model, providing clients with platforms and infrastructure for blockchain computing, including cryptocurrency mining, on a reimbursable basis. This allows using the competitive advantages of Russia in mining (cold climate, relatively inexpensive electricity, trained personnel) with a minimum level of tax and regulatory risks.

Who hosts the devices?

— At the end of 2022, the share of clients from the Middle East and the Russian Federation increased significantly, their total share exceeds 70%. But there are clients from Southeast and Central Asia, South and Central America, Africa.

— Is mining profitable now?

— The attractiveness of mining as a business depends on many factors: computing power, quality of equipment and its maintenance, cost of electricity, partner network, professional team, cryptocurrency exchange rate, etc. At the end of 2022, more than 100 thousand devices were placed in our data centers and their power consumption exceeded 300 MW — according to these indicators, we grew by more than 2.5 times over the year. We see the opposite situation in other countries. In the US and Canada, there is a wave of bankruptcies and other difficulties of mining companies, especially public ones, which is primarily due to a significant increase in electricity prices and an increase in loan rates.

— How is mining regulated in Russia?

– In fact, now mining is outside the legal field, while there is no ban. According to the Law “On Digital Financial Assets…”, the organization of issuing or issuing digital currency is regulated in accordance with federal laws. But there are no such laws. There is also legal uncertainty regarding taxation: the necessary features (the moment the tax base arises and the procedure for its calculation) are absent. All this reduces the investment potential of mining and hinders the development of the industry, mainly for industrial mining.

— How do you evaluate the developed legislation?

— As an unconditional step forward — we can work with it further in order to form meaningful regulation. At this stage, cryptocurrency legal relations in the Russian Federation can be fixed at least within the framework of an experimental legal regime. An important condition for the harmonious development of mining is the launch of circulation of digital currencies in Russia. This will allow, first of all, to correctly determine the tax base, calculate the volume of payments to the budget in order to “whitewash” the industry, and attract institutional investors. Also, the launch of cryptocurrency circulation will increase the efficiency of export-import operations.

In addition, it is advisable to establish in the Tax Code the features of taxation of mining within the framework of the general system – at the time of the sale (sale) of digital currency. Define the tax base as income reduced by economically justified and documented expenses for the implementation of mining activities (electricity, payroll, depreciation, other expenses or the cost of data center services).

One way to solve the problem of gray household and other retail mining, which creates emergency situations in utility and other electrical networks and forms the growth of cross-subsidization in the electric power industry, can be the introduction of registration of all equipment using a software and hardware complex. It will provide tax and other competent authorities with access to information about the produced cryptocurrency, working computing power, spent volumes of electricity and other data.

Interviewed by Ksenia Kulikova