Russia is looking into taxing cryptocurrency mining in a way, similar to how it taxes treasure findings or acquired properties, reported Izvestia, a local Russian media outlet. A new report submitted by the Association of Banks of Russia proposed taxation on mined cryptocurrencies, using the analogy of finding a treasure which is taxable. This would help regulators treat cryptocurrencies as “treasure” or “finding,” and help them tax it within their existing legal framework.
Since the miner is creating a digital asset, the act may be deemed as “finding of the treasure,” making them the legal owner. The document considered this concept as “a completely rational-legal meaning process.”
The document elaborated further,
“Using legal fiction, it could be argued that the first owner of the crypto assets“ found them ”, since receiving from an anonymous system can be conditionally considered a find.”
However, Anatoly Kozlachkov, ADB Vice President, clarified that mining cryptocurrencies are not just a “finding.” In fact, miners create it themselves and thus, within the legal framework, tokens can be considered as being “newly created,” which also includes property independently produced by a citizen, fruits, products etc. Kozlachkov went onto add that since these digital assets would be used for barter and transactions, it can be taxed under a relevant tax section.
The report proposes to tax the profit on crypto-transactions under its security laws and proposes citizens declare their purchase of virtual currencies.
Regulators are realizing banning virtual currencies would cause more harm than good
The Central Bank of Russia, as well as regulators, have been quite skeptical about regulating virtual assets. However, looking at the recent developments and proposal for taxing profit as well as crypto-mining of digital assets, there may be a change in sentiment. In April this year, an analytical note regarding digital currencies on the Central Bank’s website noted that digital currencies are “the least risky and most liquid assets available to a wide circle of people.”
Similarly, France also declared tax exemption on crypto-to-crypto trade, while only the gains while converting it to the traditional fiat will be taxable. Apart from that, any purchase of goods using digital currencies will be liable for value-added tax, which in turn would help the government keep track of crypto-transactions. Portugal went a step further by exempting crypto-trading and payments tax-free.
The author of the document which categorizes mined currencies and treasure finding under the same bracket believes that prohibiting the use of digital currencies is more dangerous. Experts have tried to debunk many myths surrounding digital assets, including the anonymity factor and its use for illicit activities. Bitcoin is not anonymous, contrary to popular belief, and all the transactions and wallets associated with it can be tracked on the public ledger.