New Law Mandates AML Compliance for Russia’s Crypto Mining Industry

The Russian State Duma has passed a law requiring cryptocurrency miners to comply with anti-money laundering (AML) regulations. This law, distinct from the draft bill on mining and digital currencies, was approved on July 23. It incorporates definitions from the mining bill but focuses on different aspects, according to RBC.

Russian cryptocurrency users anticipated the review of mining and digital currency bills under the experimental legal regime (EPR). These were listed as the 69th and 70th issues on the agenda. However, deputies only reviewed up to the 60th issue during the session, as explained by Andrey Tugarin, head of GMT Legal.

The newly adopted law amends Article 7.1 of Law 115-FZ, initially applicable only to notaries. In its second reading, the law was expanded to include cryptocurrency miners and mining pool participants, obligating them to adhere to AML and counter-terrorism financing regulations.

Federal Law "On Counteracting Legalization (Laundering) of Proceeds from Crime and Financing of Terrorism" (115-FZ) aims to prevent money laundering. Companies might need to provide supporting documents and explanations for their transactions. This means miners must disclose income sources and explain the economic rationale behind transactions to confirm business legitimacy.

The mining bill, which was not reviewed, also proposes amendments to this same article. Interestingly, the notary law text already includes terms like "miners" and "mining pools," according to Tugarin. He suggests that the mining bill is likely to be adopted soon, but its final version remains uncertain. It may exclude the ban on organizing cryptocurrency trading proposed by the Ministry of Finance.

The Ministry of Finance recommended removing the prohibition on organizing cryptocurrency exchanges in Russia from the mining bill. It also suggested allowing the advertisement of digital currency-related products and permitting cryptocurrency trading within the EPR framework. The current version of the bill proposes banning such advertisements and prohibits establishing Russian cryptocurrency exchanges and exchangers.

Under the newly passed law, operators of Russian mining pools and mining companies must identify clients and assess their risk levels for suspicious financial activities. If suspicions arise, pool operators or company representatives must provide information to Rosfinmonitoring upon request.

Evgenia Burova, communications director at the Garantex exchange, argues that regulating cryptocurrency exchanges and exchangers is essential to combat terrorism financing and money laundering. She insists that these entities, alongside miners and mining pools, should be subject to AML/CFT regulations urgently.

According to BitRiver, a Russian mining company, Russian miners extracted bitcoins worth 315 billion rubles in 2023. The Bank of Russia reports that Russian users' bitcoin and Ethereum transactions on popular platforms totaled 4.78 trillion rubles. This figure may not include over-the-counter (OTC) and peer-to-peer (p2p) transactions. Chainalysis estimates that USDT transactions in Russia exceed bitcoin transactions by 5-9 times, which are not included in the 4.78 trillion rubles.

A recent VTsIOM survey revealed that 87% of Russians are aware of cryptocurrency. Given the current economic situation, this is understandable, concludes Burova.

In March, a bill was introduced to the State Duma to extend Law 115-FZ to digital ruble transactions. The bill envisions a multi-tiered AML compliance model involving participating banks and the Bank of Russia, which will assess risks, freeze funds, and report suspicious activities to Rosfinmonitoring.