Despite implementing new crypto mining regulations in late 2024, Russia has struggled to bring its vast mining sector into the legal fold. According to Finance Ministry official Ivan Chebeskov, only 30% of the country’s crypto miners have registered with the Federal Tax Service, leaving the majority, nearly 70% operating without formal oversight.

“When introducing mining regulations, our general approach was to bring this industry out of the shadows as much as possible. We have not yet completed this process,” Chebeskov told local media outlet TASS. The statement highlights ongoing regulatory challenges in a nation that has become a global mining hotspot due to its abundant energy resources and favourable infrastructure.

Government Plans Stricter Enforcement

While the government is aiming to increase compliance, progress has been slow. Chebeskov confirmed that more efforts are needed to ensure broader registration, although specific measures were not detailed. However, reports suggest that authorities may soon impose harsher penalties for non-compliance.

According to Forbes Russia, a new bill is in development that would raise the fine for illegal crypto mining from 200,000 rubles (approx. $2,500) to as much as 2 million rubles (approx. $25,500). The proposed legislation aims to give enforcement agencies more teeth to act against unregistered operators and bring the informal mining economy into the official tax framework.

Illegal Mining Farms Under Scrutiny

Chebeskov’s comments came as police cracked down on another illegal mining operation, this time in the Rostov region. A mining farm hidden in a garage complex in Bataysk was shut down by authorities, who seized 13 mining machines. A criminal case was opened under Article 165 of Russia’s Criminal Code, which covers property-related offences.

This incident follows a similar bust last week in the Pribaikalsky region, where miners had concealed their operation inside a truck while siphoning electricity from a local village. These cases reflect a broader trend of underground mining operations that avoid taxation and often engage in electricity theft.

Industry Critics Call for Clearer Rules

Despite new regulations, many industry participants believe Russia’s legal framework still lacks clarity. While the recent laws introduced tax obligations and registration requirements, they have not fully legalised or stabilised the mining environment.

Nikita Zuborev, chief analyst at BestChange, criticised the laws for focusing solely on taxation rather than offering clear operational guidelines. “No new clear regulations are introduced; it only paves the ground for more precise taxation,” he told Cointelegraph.

Further complications include a ban on foreign individuals participating in mining, along with regional restrictions in several parts of Russia. These limitations have made it difficult for some businesses to operate openly or expand.

Mining Industry Thrives Despite Hurdles

Interestingly, the lack of full regulatory compliance has not stopped Russia’s mining sector from growing. Industry insiders report that the ecosystem continues to expand, with more firms offering comprehensive services, from data centre construction to equipment management.

Vyacheslav Kopylov from Prostomining said that recent law changes allowing companies to legally record mining equipment and pay taxes have helped bring some legitimacy to the sector. “The adoption of new laws in November that allow legal entities to put mining equipment on their balance sheets and pay taxes is an important step for the industry,” he noted.

Major crypto events like the Russian Blockchain Forum are now dominated by mining service providers, further cementing the industry’s role in Russia’s digital economy. “Most of the large stands are occupied by companies offering turn-key services,” Kopylov added.

Foreign Interest Grows Despite Restrictions

Even though Russia has formally banned foreign entities from operating local mining farms, international interest, particularly from China is on the rise. The promise of cheap and stable energy continues to attract foreign investors and corporations.

According to Hotcoin’s Chief Operating Officer, many Chinese firms are eyeing expansion into the Russian mining sector. “I saw a lot of Chinese who would like to invest in this sector in Russia, not only because of the friendly relationship between Russia and China, but also because of the adequate and cheaper energy in Russia,” he said. Chinese companies are reportedly establishing a strong foothold in the Russian market and are expected to increase their presence in the near future.

Regulation vs. Reality

Russia’s attempt to regulate crypto mining has laid the groundwork for taxation and formal business operations. However, the majority of the industry still remains in the shadows. As the government considers more aggressive enforcement and increased penalties, the gap between policy and practice remains significant.

Despite regulatory shortcomings and legal ambiguity, the crypto mining industry in Russia appears resilient and even flourishing driven by infrastructure, cheap power, and growing domestic and foreign interest. Whether the government can bring most of this industry into the legal sphere remains to be seen.