Russia’s state budget is losing huge amounts of money in uncollected taxes from illegal cryptocurrency mining operations in the country.
Moscow is trying to bring the whole business out of the shadows, but despite legalizing it last year, less than a third of Russian miners are registered with federal tax authorities.
Russian state misses out on 10 billion rubles in tax revenue from mining
Observers of the sector say Russia has been unable to recover large sums of money as a result of tax evasion and fraud in the cryptocurrency mining sector.
Associate Professor Pyotr Fyodorov of the National Institute of Electronic Technology (MIET) estimated the following to Russian media.
“Russia loses around 10 billion rubles (more than $122 million) in tax dollars annually to illegal mining.”
Most underground crypto farms are found in Siberia’s Irkutsk Oblast and the Republic of Dagestan in the North Caucasus, two regions where mining activity is concentrated.
Fyodorov further elaborated in an interview with the 78TV channel that they are often built on abandoned industrial or agricultural land in rural areas that still have access to the power grid.
The engineer emphasized that these facilities can be identified by significant spikes in electricity overconsumption in the region and frequent breakdowns in the electricity grid.
Most Russian crypto miners avoid taxation
Cryptocurrency mining is one of the few, if not the only, well-regulated crypto-related activities in Russia, and Russia recognized it as a legal business in 2024 to capitalize on the profits and take advantage of the vast country’s competitive advantages of cheap energy and cool climate.
To legally engage in mining, both companies and individual entrepreneurs must register with the Federal Tax Service (FNS) and pay taxes to the state. Home miners are exempt from this obligation as long as their monthly electricity usage is less than 6,000 kWh.
Energy shortages caused by mining booms in parts of the country, such as the two regions mentioned by Fedorov, have been more or less addressed by regional, seasonal or permanent restrictions.
Although the Department of Energy recently indicated that it sees no reason to expand existing regional bans on cryptocurrency mining, tax evasion in this sector remains a challenge for Russian authorities at the federal level.
Speaking at the recent “Digital Finance: New Economic Reality” forum, Russian Deputy Finance Minister Ivan Chebeskov revealed that so far only about 30% of participants in coin mining activities have registered with the FNS, and the government is preparing to increase that number.
One of the proposed measures, discussed with the Federal Customs Service, is an amnesty for imported mining equipment that is not officially registered.
The other is a new bill that would introduce tougher penalties for illegal cryptocurrency miners, something the country’s electricity grid operator Rosseti has also called for.
Treasury officials also emphasized the need for Russia to develop its own infrastructure for mining and anything related to cryptocurrencies. Quoted by cryptocurrency news outlet Bits.media, Chebeskov explained:
“Working with virtual assets requires a serious infrastructure. By serious, we mean clear rules of the game, such as the ability to convert cryptocurrencies into fiat currencies and a more active use of cryptocurrencies for payment and investment purposes.”
“We are gradually moving towards this goal,” the deputy head of Russia’s Ministry of Finance said, noting that his ministry is already working with the Central Bank of Russia to develop domestic crypto infrastructure within the country’s established “experimental legal regime” for cryptocurrency operations.