Russia has taken another decisive step towards tightening control over its fast growing cryptocurrency mining sector, with the Ministry of Justice proposing criminal penalties for miners who operate without registering with tax authorities. The move follows repeated warnings from senior officials that a majority of miners continue to work outside the legal framework, depriving the state of tax revenue and increasing pressure on regional power grids.
Under the proposed amendments to the Criminal Code, individuals and groups engaged in illegal mining could face heavy fines, forced labour and prison sentences. The draft law reflects Moscow’s broader strategy to bring the crypto mining industry out of the shadows while maintaining strict state oversight of digital assets.
Draft bill introduces fines, forced labour and prison terms
The new draft bill published by the Ministry of Justice outlines a range of punishments for unregistered cryptocurrency mining. According to the proposal, individuals found mining illegally could be fined up to 1.5 million rubles, equivalent to around 19,000 dollars, or sentenced to up to two years of forced labour.
For cases involving what authorities describe as outsized profits, the penalties would be significantly harsher. Offenders could face prison sentences of up to five years, forced labour of up to 480 hours and fines reaching 2.5 million rubles. The draft also specifies tougher treatment for organised groups, which would include coordinated mining operations involving multiple people or entities.
If an unregistered organised group is found to have generated outsized profits from illegal mining, courts could impose fines of up to 2.5 million rubles or sentence those involved to up to five years of forced labour or imprisonment. The inclusion of organised groups signals that the authorities are particularly concerned about large scale mining farms operating without oversight.
The Ministry of Justice has framed the proposed amendments as a necessary response to widespread non compliance within the sector. Officials argue that without criminal liability, existing administrative measures have failed to persuade many miners to legalise their activities.
Government seeks to bring miners into the tax system
The crackdown forms part of a broader government effort to regulate cryptocurrency mining as a taxable economic activity. Under current rules, registered miners are required to submit a special monthly tax declaration detailing the amount of digital currency they have produced. This data allows tax authorities to assess income and ensure that profits generated through mining are properly reported.
New draft amendments to the Criminal Code of the Russian Federation. Source: regulation.gov.ru
Despite the introduction of these requirements, compliance remains low. Speaking to the state news agency Tass in June, Deputy Finance Minister Ivan Chebeskov said that only around 30 percent of cryptocurrency miners in Russia had registered their operations. He acknowledged that the original aim of regulation was to formalise the industry rather than suppress it.
Chebeskov explained that the government’s general approach had been to bring mining out of the informal economy as much as possible. He admitted that the process was far from complete, suggesting that stronger enforcement measures were now being considered to accelerate compliance.
The low registration rate has become a point of concern for policymakers, particularly as Russia has emerged as one of the world’s leading destinations for crypto mining. Abundant energy resources and relatively low electricity costs have made the country attractive to miners displaced from other jurisdictions.
Small scale miners face different rules
Not all miners are subject to the same regulatory burden. Under a government decree published on 1 November 2024, individuals with a monthly electricity consumption below 6,000 kilowatt hours are classified as physical persons. These small scale miners are allowed to mine without registering with the Federal Tax Register.
However, even these individuals are not exempt from taxation. They are required to pay personal income tax on any cryptocurrency they mine. Authorities argue that this distinction is designed to avoid placing excessive administrative pressure on hobbyist miners while still ensuring that income derived from digital assets is taxed.
The threshold of 6,000 kilowatt hours has become a key dividing line in the regulatory framework. Miners who exceed this level of consumption are treated as commercial operators and must register, submit monthly reports and comply with taxation rules. Failure to do so could now carry criminal consequences if the proposed amendments are adopted.
Critics have questioned whether the consumption threshold is realistic, noting that even relatively modest mining setups can quickly exceed the limit. This has fuelled concerns that many miners who consider themselves small scale may inadvertently fall foul of the law.
Registration numbers remain low despite new laws
Official figures highlight the scale of the challenge facing regulators. According to Finance Minister Anton Siluanov, there were just 1,364 registered cryptocurrency miners in Russia at the end of October. He disclosed the number while speaking at a plenary session of the State Duma, underscoring the gap between the size of the industry and the number of compliant operators.
These figures came shortly before a major legislative milestone. In August 2024, President Vladimir Putin signed a package of laws establishing a formal regulatory framework for cryptocurrency mining. The laws came into force on 1 November 2024 and introduced compulsory registration and taxation requirements for all entities involved in mining activities.
The framework also extends beyond miners themselves to include infrastructure providers, such as companies that supply hosting services or specialised equipment. By widening the scope of regulation, the government aims to close loopholes that previously allowed some participants to operate without direct oversight.
Despite these measures, the limited number of registered miners suggests that enforcement has been uneven. The proposed criminal penalties appear to be designed to change that dynamic by raising the cost of non compliance.
Regional restrictions and foreign mining bans
The 2024 mining laws include several provisions that have attracted criticism from industry participants. One of the most controversial measures is the ban on foreign entities engaging in cryptocurrency mining within Russia. Authorities have justified the restriction on national security grounds, arguing that strategic control over energy intensive activities is essential.
The law also gives the government the power to restrict or ban mining in specific regions. This provision is intended to protect local power grids from overload, particularly in areas where electricity shortages or infrastructure constraints already exist.
However, critics argue that these restrictions undermine claims that Russia has fully legalised crypto mining. By retaining the ability to prohibit mining in certain regions and exclude foreign players, the state maintains tight control over who can participate in the industry.
Some industry observers have warned that regional bans could push mining activity back underground, especially in areas with cheap electricity. This risk may have contributed to the Justice Ministry’s decision to pursue criminal penalties as a deterrent.
A balancing act between control and revenue
Russia’s approach to cryptocurrency mining reflects a broader balancing act between control and economic opportunity. On one hand, the government sees mining as a potential source of tax revenue and a way to monetise surplus energy capacity. On the other, officials remain wary of cryptocurrencies as tools for capital flight and sanctions evasion.
By introducing criminal liability for unregistered mining, the authorities are signalling that tolerance for informal activity is running out. The proposed fines and prison sentences are intended to send a clear message that mining must take place within the legal framework.
Whether the new measures will succeed in driving mass registration remains uncertain. Much will depend on how strictly the laws are enforced and whether the regulatory burden is seen as manageable by miners. For now, the draft bill marks the strongest move yet in Russia’s effort to bring its crypto mining industry firmly under state control.
