(Kitco News) -
A huge new Siberian cryptocurrency mining center subsidized by the Russian government is set to open in the first half of 2023, according to a local news report published Feb. 8.
The new data processing center is being built in Mukhorshibir, Buryatia, in eastern Siberia, at a cost of 900 million rubles, or $12.3 million. It will house 30,000 crypto mining machines and consume 100 MW of electricity.
The data center is being built by Bitriver-B, part of the BitRiver group of companies which are the biggest players in crypto mining data centers in the country, with the direct support of the Corporation for the Development of the Far East and the Arctic (KRDV).
KRDV is a management company controlled by the Ministry for the Development of the Far East and the Arctic. The corporation uses various state support mechanisms to implement investment projects in the Far East and the Arctic regions of the Russian Federation, and they have established a special legal regime for the new facility.
“The Bitriver-B company, which is building one of the most important enterprises for the digital development of Buryatia, has been provided with a wide range of government support tools,” said Dmitry Khameruev, director of KRDV Buryatia. These include zero land and property taxes, insurance premiums of 7.6%, and a reduced income tax rate.
Also, once the new facility is connected to the national power grid, the electricity tariffs will be cut by about half. “For an energy-intensive enterprise, this is one of the most important support measures,” Khameruev said.
Construction of the buildings and structures of the data center is currently underway, and the new crypto mining facility is expected to employ 100 people.
The regulatory side of Russian cryptocurrency mining remains murky, however. The country’s draft bill on the legalization of crypto mining stalled in January over objections from the Central Bank of Russia (CBR) and law enforcement agencies.
“We’ve stalled again,” Alexei Moiseev, Russia’s Deputy Finance Minister, told local reporters on Jan. 18. “We have disagreements on it, not only with the Central Bank, but also with law enforcement.”
Moiseev said they haven’t given up on the bill, and a number of meetings are planned to address the issues. “We hope to come to an agreement,” he said.
The head of the State Duma’s Committee on the Financial Market, Anatoly Aksakov, also told reporters that the reason the draft law was not adopted in 2022 was that one of the stakeholders in the negotiations had concerns that the sales channels of Russian cryptocurrency miners could be used to illegally withdraw funds abroad, primarily by foreign companies.
“I will not name the organizations,” Aksakov said. “However, according to the critics of the bill, it could create channels for withdrawing funds from our country. Supposedly this would be done to buy cryptocurrency, but the risk may exist that it would be used to withdraw capital from our country.”
Aksakov said that if the parties are not able to reach an agreement, a new version of the bill might need to be submitted.
On Dec. 7, the Russian Central Bank said that they supported the bill in theory, but only if new restrictions were added on the sale of mined crypto.
“We believe that cryptocurrencies obtained through mining should be sold exclusively using foreign information infrastructure and only to non-residents,” the RCB said. In the event of its sale within Russia, miners would need to exchange it through an authorized organization. “In general, we take the position that the circulation of digital currency on the territory of the Russian Federation is unacceptable.”
Under the draft law submitted to the State Duma in November, miners are given two options for selling their mined digital currency: through foreign systems without the need to comply with the law on currency regulation, and through a new platform that would be created in Russia as part of an experimental legal regime. In both cases, transactions must be reported to the Federal Tax Service.
However, the draft bill does not specify that miners’ cryptocurrency must be sold only to non-residents, and the wording about the possibility of sale within Russia does not make clear that there would be only one authorized organization to process them.
"The digital currency obtained as a result of mining may be alienated by the person who has carried out the mining of this digital currency, provided that when making transactions with it, objects of the Russian information infrastructure are not used, except for cases when transactions are carried out in accordance with the established experimental legal regime,” the bill reads.
At the time, Deputy Finance Minister Alexei Moiseev told reporters that the Ministry of Finance does not agree with the stated position of the Central Bank.
“We cannot yet accept this new position from the Central Bank,” Moiseev said. “In effect, all mining which is not carried out within the experimental legal regime is banned. That is, all mining must be done through an authorized organization, and this amounts to total licensing. We are against it.”
According to the original language in the draft bill, miners would have been able to begin selling mined digital coins starting Jan. 1, 2023, but this has now been delayed until the issues with the bill are resolved.
In April 2022, the International Monetary Fund warned that Russia could use the crypto ecosystem to get around the Western sanctions that have been imposed on the country since it invaded Ukraine in February, including generating revenues by using its embargoed energy sector to mine cryptocurrencies.
