A major announcement has come from the Putin government: Russia demands data centers to report comprehensive information on encryption miners, targeting unregistered mining activities.

The Russian government has once again made headlines in the field of crypto assets mining. While preparing to restrict the computing power and electricity used for minting digital currencies, the Russian tax authority has issued a new order: all data centers and hosting service providers are obligated to share all relevant information about crypto miners using their services with the national tax authorities. This new regulation, effective July 30, aims to gain a comprehensive understanding of miners' activities and combat unregistered mining practices, bringing new changes to the regulation of crypto assets in Russia.

The mining infrastructure operator is responsible for reporting on the miners' status

According to the official newspaper of the Russian legislative body, "Parliamentary Gazette," the tax authorities have approved a new reporting form and its specific data points, which will take effect on July 30. It states: "The FNS knows almost everything about miners—from the electricity fees they pay to their equipment models and their operating hours."

Russia will recognize the minting of digital currencies such as Bitcoin as a legal business activity in 2024. Starting from November, both companies and individual entrepreneurs can engage in mining as long as they sign up with the FNS. Private citizens with a monthly electricity consumption of less than 6,000 kilowatt-hours (used to power mining machines) are not required to register. Data centers and hosting service providers are listed in a separate directory of "Mining Infrastructure Operators."

Miners will provide independent information about their activities and equipment when registering with tax authorities. The latest federal National Services Agency (FNS) decree has amended the country's tax rules and established a set of procedures for collecting similar data from companies that rent space and hardware to miners. This includes data center and mining farm operators, as well as mining hosting service providers and any platforms that provide computing power to third parties. Failing to submit the required information in a timely and complete manner will result in fines and even cancellation of registration.

The Russian tax authorities want to know everything about miners

The information requested by the Russian government is quite comprehensive. The business news portal RBC noted in its report that mining hotels need to provide tax authorities with the electricity prices set for their clients, as well as the total electricity consumption under each price.

The hosting service provider must indicate the manufacturer, model, and factory number of the mining equipment used by each user. The new form must also specify the mining algorithm, maximum computational power, energy efficiency rating, and operating time.

Bitcoin farm operators are required to report the company and tax registration numbers of the legal entities and entrepreneurs using their services, as well as the full names and passport details of private individuals among their clients. Each client must submit information on the types and quantities of crypto assets they have mined. If the Miner uses a mining pool, the name of the mining pool should be specified. FNS also requires a page link for real-time monitoring of the operation of mining machines.

Challenges After the Legalization of Mining and Government Response

The legalization of mining has sparked a boom in the mining industry in Russia, but authorities have been concerned about the low number of registered Miners. It is estimated that the number of registered Miners is less than one-third of all mining enterprises. The increasingly severe energy shortages in some regions of the country are another worrying issue, and authorities have imposed restrictions on mining activities in about a dozen energy-deficient areas.

In early July of this year, Russian President Putin defended these measures, emphasizing that Russia should adopt a balanced approach to resource development. Shortly thereafter, the Russian parliament passed a legislative amendment prohibiting data centers from engaging in crypto mining. This move is expected to save computing power for other applications such as big data processing and artificial intelligence (AI) development.

Conclusion:

The Russian government has demanded data centers to comprehensively report information on crypto miners, indicating a significant strengthening of its regulatory efforts on crypto mining activities. This policy aims to address unregistered mining activities and energy shortages, ensuring that the government can fully grasp the operational status of miners. This will have a profound impact on the domestic crypto mining industry in Russia and may encourage more miners towards compliance.