Putin Recognizes Bitcoin, Pushes Forward with Crypto Laws in Russia

• Putin recognizes Bitcoin as legal property
• Russia exempts cryptocurrency mining from VAT
• Digital Ruble: Russia Moves Towards Own Digital Currency

On December 4, 2024, Russian President Vladimir Putin declared that Bitcoin and other cryptocurrencies are undeniable and that no one can ban them. During At an investment forum in Moscow, Putin questioned the need to hold foreign currency reserves, noting that they can easily be confiscated for political reasons, as evidenced by the freezing of $300 billion in Russian reserves by Western countries at the start of the war in Ukraine in 2022.

▶ #Ethiopia grows at a phenomenal rate, #Putin says #Russia is focused on those markets where there is growth and where there are partners who do not react to "shouts" from third countries, Russian President Vladimir Putin said. pic.twitter.com/K7NH1Il5x1

— Sputnik Africa (@sputnik_africa) December 4, 2024

Putin suggested that investing state reserves in infrastructure, logistics, science and education would be more reliable than keeping them in foreign assets. He criticized the US administration for undermining the role of the dollar as a global reserve currency by using it for political purposes, forcing many countries to seek alternative assets, including cryptocurrencies. “For example, Bitcoin, who can ban it? Nobody,” Putin said, emphasizing that the development of new payment technologies is inevitable due to their lower costs and greater reliability.

At the time of publication, the price of Bitcoin was quoted at US$95.029,68, up 0% in the last 24 hours.

Putin recently signed a law recognizing Bitcoin and other cryptocurrencies as legal property in Russia. The legislation establishes an experimental legal regime, exempting the mining and sale of cryptocurrencies from Value Added Tax (VAT), with the aim of boosting the use of digital currencies by eliminating the tax burden associated with traditional financial transactions.

Profits from cryptocurrency miners will be classified as “in-kind income” and subject to tax based on market value, allowing for deductions for operating costs. From 2025, corporate organizations will pay a 25% corporate tax on their mining revenues. Operators of mining facilities must report to tax authorities about the use of their services, or face fines.

For individuals, the tax structure on profits from cryptocurrencies consists of two brackets: 13% for annual income up to 2,4 million rubles (approximately R$135) and 15% for higher amounts. Both mining and selling cryptocurrencies will not be subject to VAT, similar to ICMS in Brazil.

These measures reflect Russia’s move to embrace cryptocurrencies as an alternative to traditional financial channels, especially in response to Western sanctions. Previously, the Central Bank of Russia has recommended that companies use cryptocurrencies in international trade to circumvent financial restrictions.

Additionally, Russia is developing a payment infrastructure that bypasses the SWIFT system, with the aim of supporting de-dollarization and facilitating international transactions using cryptocurrencies.

However, Putin has expressed concerns about the impact of cryptocurrency mining on the country’s energy infrastructure, highlighting the potential for uncontrolled growth in electricity use for mining, which could lead to power shortages in certain regions. To mitigate these risks, he has ordered efforts to control digital currency mining in Russia, including through tax and tariff policies.

In parallel, Russia is moving forward with the development of its own central bank digital currency, the digital ruble. Putin signed a law allowing the creation of the digital ruble, with testing scheduled to begin in August 2023. The initiative aims to modernize the Russian financial system and provide an alternative to decentralized cryptocurrencies.