Russia's Cryptocurrency Policy Transformation: An Exploration of Experimental Legislation
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Russia's Cryptocurrency Policy Transformation: An Exploration of Experimental Legislation
Russia plans to impose value-added tax on companies that rent out mining equipment or data centers to overseas enterprises and mining pools.
Navigating Web3 tides with focused insightsAuthor: TaxDAO
1. News Overview
Russia plans to impose value-added tax (VAT) on companies renting out mining equipment or data centers to overseas enterprises and mining pools.
Starting September 1, 2024, Russia officially permitted the use of cryptocurrencies in cross-border trade and digital asset exchanges, covering major cryptocurrencies such as Ethereum (ETH) and the stablecoin USDT—marking the country as one of the few globally to recognize cryptocurrency as a legitimate payment instrument. In November of the same year, cryptocurrency mining was formally legalized in Russia, ending years of operating in a regulatory gray zone. By January of this year, a new Russian law requiring all industrial-scale miners and "Mining Infrastructure Operators (MIOs)" to register in a national registry came into effect. As of April 1, 2025, 116 MIOs and 606 industrial miners (промышленные майнеры) have completed registration. However, the Federal Tax Service (FTS) believes that a significant number of companies remain non-compliant. The registry is managed by the FTS, which is currently developing detailed tax regulations for annual profits of industrial miners and MIOs.
On May 1, 2025, the Russian Ministry of Finance announced plans to impose VAT on companies providing mining equipment or data center rental services to foreign enterprises and mining pools. Energy providers supplying power to overseas mining operations are also included under the new rules. The Ministry stated this move aims to clarify tax procedures for mining equipment leasing and establish taxation frameworks for businesses offering "mining hashpower" to non-Russian clients. Due to the lack of “clear interpretation” in existing regulations, companies face difficulties when filing reports; VAT may apply to real-time, monthly, or annual leasing invoices.
2. Details of Russia’s New VAT Regulations
2.1 Legislative Process
On May 1, 2025, the Russian Ministry of Finance formally proposed a draft bill to levy VAT on cross-border mining services—a critical step forward in regulating cryptocurrency mining taxation. The bill is currently in the public consultation phase, allowing industry associations, enterprises, and the general public to provide feedback. After the consultation period ends, it will proceed to parliamentary review. If passed, the law is expected to take effect on January 1, 2026, with corresponding amendments to Article 149 of the Tax Code of the Russian Federation to clearly define VAT treatment for digital currency-related transactions. To ensure a smooth transition, the bill includes an adjustment period for already registered miners and infrastructure operators. It also requires electricity suppliers to separately report power consumption used for cross-border mining activities, enabling tax authorities to accurately identify taxable entities and avoid excessive interference with basic energy services.
The current debate centers on the scope of taxation: energy industry associations oppose including electricity sales within the VAT framework, arguing that electricity constitutes a fundamental utility service whose costs are already reflected through pricing mechanisms. In contrast, the Ministry of Finance maintains that electricity is a core cost component of mining activities and should be subject to VAT to fully capture economic value. This disagreement could influence final rate-setting and compliance costs across affected industries.
2.2 Legal Definitions and Registration Requirements for Industrial Miners and MIOs
Russia established legal definitions for industrial miners (промышленные майнеры) and Mining Infrastructure Operators (MIOs) as early as August 8, 2024. According to reports from the Russian state news agency ITAR-TASS, on August 8 (Moscow time, UTC+3), President Vladimir Putin signed into law legislation introducing new concepts including cryptocurrency mining, mining pools, Mining Infrastructure Operators (MIOs), address identifiers, and individuals organizing pool activities. The law specifically defines criteria, eligibility standards, registration requirements, and documentation needed for industrial miners and MIOs.
An industrial miner (промышленные майнеры) refers to a legal entity or individual entrepreneur engaged in large-scale cryptocurrency mining, typically involving high energy consumption and extensive hardware deployment. Industrial miners must meet the following conditions:
(1) Entity registration: Must be a Russian-registered legal entity or self-employed individual, and listed in the FTS-managed Register of Cryptocurrency Miners;
(2) Energy usage: Individual miners using household electricity for mining must not exceed government-set consumption limits (specific values adjusted dynamically by the Ministry of Energy);
(3) Compliance obligations: Must regularly report mining income to tax authorities and pay taxes based on income brackets—investors with annual income below a threshold (2.4 million rubles) are taxed at 13%, while income above the threshold is taxed at 15%.
Mining Infrastructure Operator (MIO): Refers to operators providing specialized infrastructure and services related to cryptocurrency mining, including but not limited to mining equipment management and data center operations. The qualification criteria for MIOs are stringent and include the following aspects:
(1) Licensing system: Must obtain a Mining Infrastructure Operator License issued by a special committee under the Ministry of Digital Economy;
(2) Scope of services: May offer colocation hosting, data center rentals, and hashpower sales, but are explicitly prohibited from engaging in core power transmission or grid dispatching activities;
(3) Registration requirements: Must submit corporate charter documents, technical proposals, and electricity procurement contracts to the FTS;
(4) Must undergo annual compliance audits.
According to FTS registration requirements, both industrial miners and MIOs must submit a series of documents to complete formal registration:
(1) Legal entities must provide notarized copies of their charters containing clauses specifying industrial assembly or cryptocurrency mining activities, along with tax registration certificates and primary state registration numbers.
(2) For individual entrepreneurs, personal identification documents (e.g., notarized passport) and individual entrepreneur state registration numbers are required.
At the operational level, both individuals and organizations must provide an inventory of mining equipment, qualified electronic signatures, technical specifications, energy consumption details, and digital wallet addresses used to receive mining revenues. Additionally, they must submit documents specified under Clause "a" of Article 1 of Resolution No. 719 of the Government of the Russian Federation dated July 17, 2015, together with technical documentation for industrial products—including technical conditions, enterprise standards, process regulations, or national standards. This process ensures applicants meet technological entry, tax compliance, and anti-money laundering regulatory requirements. Non-registered entities face penalties and legal risks.
2.3 Tax Elements Under the New VAT Rules
According to the draft proposal, the VAT base will explicitly cover cross-border mining services, including renting mining equipment to overseas clients, providing real-time hashpower, and potentially electricity supply—if the Ministry of Finance's proposal is ultimately adopted. Regarding tax rates, the draft sets a standard rate of 20% applicable to equipment rental income. However, if the recipient is a company from a member state of the Eurasian Economic Union (EAEU), the provider may apply for VAT exemption under the zero-rate provision. To qualify for zero-rating, service providers must submit proof of EAEU customer tax registration and a declaration of service purpose. Other eligible zero-rated services can refer to Paragraph 1 of Article 164 of the Russian Tax Code, which lists cross-border services eligible for zero VAT. On tax liability, the draft stipulates that taxpayers are service providers (including permanent establishments of foreign companies) registered in Russia. If the lessee fails to fulfill reporting obligations, the actual controller of the equipment (e.g., data center operator) bears joint liability and must remit VAT and associated late fees.
Filing cycles consist of monthly and annual submissions, carried out by Russian-based service providers who must present cross-border service contracts, foreign exchange receipts, and other relevant materials to meet tax obligations.
(1) Monthly filing: Typically requires submission of a VAT return, accompanied by notarized bilingual (Russian-English) cross-border service contracts and bank confirmation of foreign exchange income (proof of RUB/foreign currency receipt). For claims of zero-rate treatment on services provided to EAEU customers, valid tax registration proof of the client must be attached.
(2) Annual filing: Requires submission of detailed device usage logs recording either duration of equipment usage by foreign clients or hashpower output data (unit: TH/s·day).
All filings must be submitted via electronic signatures certified by the Federal Tax Service (FTS), and hashpower services must be strictly measured on a daily basis, matching output volumes with contractual pricing terms.
3. FinTax Perspective
The new VAT regulation has sparked intense domestic debate in Russia. Supporters argue that the policy brings two key benefits. From a policy coordination perspective, earlier regulations requiring all cryptocurrency mining operations in Russia to register enable tax authorities to comprehensively track industry-wide equipment holdings. This is significant—not only does it give regulators clear visibility into the sector's scale, but it also provides precise targeting capabilities for VAT collection. Through registration data, tax authorities can identify taxable entities, understand their equipment quantities, scales, and operational status, thereby effectively implementing the new VAT rules and ensuring full tax compliance.
In terms of government revenue, the implementation of the new VAT rule is expected to generate substantial fiscal income. The Ministry of Finance estimates annual additional VAT revenue between 45–60 billion rubles. This funding holds strategic importance for the Russian government and is primarily intended to subsidize upgrades to domestic power infrastructure. Cryptocurrency mining is a highly energy-intensive industry with high demands for stable and high-quality power supply. Upgrading electrical infrastructure improves efficiency and reliability, reduces corporate electricity costs, and better supports the development of the mining industry. Moreover, from a macroeconomic standpoint, this fiscal inflow can also be allocated to other areas of public welfare such as education, healthcare, and social security, improving living standards and promoting sustainable economic growth. At the same time, the introduction of the VAT regulation allows the Russian government to steer the cryptocurrency mining industry toward greater standardization and legality, fostering healthy and stable industry development and contributing to national economic transformation.
Nevertheless, the draft regulation faces strong opposition. Critics argue that in the short term, the new VAT rule will increase tax burdens, potentially forcing some small and medium-sized industrial miners and MIOs to exit cross-border operations due to unaffordable cost increases. These smaller firms often have limited scale and weak financial resilience, making it difficult to sustain normal operations and profitability under higher tax rates. Their departure would accelerate industry consolidation, concentrating market share further among larger industrial miners and MIOs. While this concentration may enhance overall industry efficiency and competitiveness to some extent, it could disrupt ecological balance within the broader mining market.
In the long run, industry trends could become even more challenging. Leading industrial miners and MIOs, seeking lower costs and higher margins, might relocate their data centers to low-tax jurisdictions such as Kazakhstan. These countries may offer more favorable tax policies and cheaper electricity, attracting migration of key players. Should large-scale relocations occur, Russia’s share of global mining hashrate may decline. Since hashrate represents the core competitive advantage in cryptocurrency mining, a reduction in hashrate share would weaken Russia’s influence and voice in the global mining arena, potentially affecting technological advancement and innovation in this field.
We believe several additional factors warrant attention regarding the draft regulation. First, there remains ambiguity over tax classification: whether mining services should be categorized as “equipment leasing” subject to a 20% VAT rate is still under discussion and no consensus has been reached between the Ministry of Finance and the tax authority. Second, the absence of cross-border transaction documentation poses a serious problem—over 60% of mining companies cannot provide tax-paid certification signed by overseas clients, leading tax authorities to reject input VAT deductions. Third, the issue of allocating energy costs remains unresolved: electricity expenses constitute the largest portion of mining operational costs, yet current regulations do not specify the deductible proportion of VAT on electricity procurement invoices.
Despite these controversies, overall, this initiative represents a constructive attempt by Russia to transform its domestic cryptocurrency policy and promote healthier market development. If the reforms are successfully implemented and yield positive outcomes, Russia may expand similar measures to other sub-sectors, continuously guiding the evolution of its cryptocurrency industry while safeguarding national interests.
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