Russia Moves to Jail Illegal Crypto Miners Under New Law

• Russia proposes jail and fines to force miners into legal registration nationwide
• Only thirty percent of miners are registered as authorities tighten enforcement rules
• Foreign firms remain prohibited as regions gain power to regulate mining activity

Russia has introduced a new draft bill that seeks to criminalize unregistered cryptocurrency mining, proposing heavy fines, prison terms, and forced labor to curb illegal activity and bring miners into the tax system. The draft amendments published Monday by the Ministry of Justice would impose penalties of up to 1.5 million rubles and as much as two years of forced labor for unauthorized mining operations.

For mining activities that generate outsized profits, the proposed law allows sentences of up to five years in prison combined with forced labor and fines reaching 2.5 million rubles. The proposal follows repeated warnings from the Ministry of Finance that illegal mining continues to strain power systems and deprive the state of tax revenue.

Penalties Escalate for Organized and High-Profit Mining

Under the draft bill, lawmakers reserve the strictest sanctions for cases involving organized groups or income classified as significant or especially large under criminal law definitions. In such cases courts could impose fines of up to 2.5 million rubles alongside prison terms of up to five years or equivalent periods of forced labor depending on the severity of violations.

Even smaller unauthorized mining operations would face tighter enforcement since courts could order up to 480 hours of compulsory labor in cases deemed less severe. The tiered penalty structure aims to distinguish casual noncompliance from systematic operations that exploit electricity resources while operating outside the legal framework.

Registration Rules and Tax Compliance Remain Central

The proposed penalties build on Russia’s existing crypto mining laws signed last year by Vladimir Putin, with core provisions taking effect on November 1. Those laws legalized crypto mining while introducing mandatory registration and reporting requirements for mining firms and pool operators across the country.

Miners must submit monthly tax declarations detailing the amount of digital currency produced, with authorities seeking to formalize a rapidly growing industry. Only about 30 percent of miners have registered as of June 19, according to Deputy Finance Minister Ivan Chebeskov, who told Tass that regulators aim to bring the industry out of the shadows.

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Thresholds Exempt Small Miners but Tighten Oversight

Russia’s framework includes exemptions for individuals whose monthly electricity consumption stays below 6,000 kilowatt-hours, allowing them to mine without formal registration. These individuals still must pay personal income tax on mined cryptocurrency under a government decree published on November 1, 2024.

The law also bans foreign entities from mining in Russia and allows authorities to restrict activity in regions where energy systems face stress. Critics previously argued these restrictions were short of full legalization, yet regulators maintain the measures protect infrastructure while supporting compliant operators.

Industry Impact and Enforcement Scope Expand

Finance Minister Anton Siluanov told lawmakers that 1,364 cryptocurrency miners were registered in Russia by the end of October during a plenary session of the State Duma. The new draft bill signals a sharper enforcement phase that could lead to shutdowns among unauthorized mining farms once penalties take effect.

The small players might leave the market due to legal risks, while the licensed industrial miners are reaping the benefits of less competition and stable grid conditions. As Russia is regulating the mining industry, one question is asked by the sector and world observers: Will stricter measures against illegal mining lead to its total elimination with no interruptions in legal operations?

Mining is now considered by authorities to have a direct impact on power grids, state revenue, and capital flows. This has led to attempts to legalize mining operations and restrict the unregulated growth of the industry. Other places have gone through similar regulatory changes where the rapid increase in unregistered mining activities made it necessary to take action, for instance, in China with the early mining restrictions and in Kazakhstan after 2021.