Crypto Global

Update on crypto regulation in Russia, India and the USA

Feb 8, 2022

More nuanced proposals for Bitcoin regulation are piling up in Russia, India, and the US. Let's take a look at what's happened over the past week.

Russia

On January 21, 2022, Russia proposed a ban on the use and mining of cryptocurrencies. This proposal came from the Russian central banks, not the Russian parliament, which is understandable as the central bank does not want competition.

Since the Fiscal Policy Department of Parliament and the Ministry of Finance have their own ideas on crypto assets, they say that Russia should regulate the crypto market, not ban it. On February 3, 2022, the Russian finance minister suggests that they not only want to regulate it, but also allow private banks to sell crypto assets.

What happened recently is that the Russian government will present regulatory scenarios for crypto within a week, the report states. Russia will create alternative crypto regulation scenarios by February 11, 2022.

As far as we know, Russian President Putin has already said that Russia has certain competitive advantages, especially in so-called crypto mining. He instructed the government and the Bank of Russia to reach consensus on cryptocurrency regulation and report on the results. The fact is that Russia no longer wants to make the US dollar its reserve currency. In June 2021, Russia announced that it would partially abandon the dollar in its reserves due to numerous US sanctions. Although Russia remains dependent on the US dollar for its international reserves, the country has completely renounced the currency in its national prosperity fund set up for social causes.

India

India reportedly wanted to fine anyone trading or holding digital assets in March 2021. If the ban became law, India would be the first major economy to make holding cryptocurrency illegal. This has now taken an unexpected turn. The country of India has legalized Bitcoin and cryptocurrencies and is introducing new tax regulations in the "Budget 2022". Specifically, the tax is as follows:

• A 30% tax on all income from the transfer of digital assets.
• All crypto transactions are taxed at 1% at source.
• The donation of virtual assets is taxed at the recipient.
• Losses from the transfer of digital assets cannot be offset against other income.

India's Finance Minister recently said that there has been a phenomenal surge in virtual digital asset transactions. The scale and frequency of these transactions have made it imperative to provide for a specific tax regime.

United States of America

There was a small win for the crypto stakers last week. The IRS will treat untraded staking tokens as tax-free. The IRS is now offering the plaintiff a refund.

The IRS has offered a refund to a US couple and plaintiffs in a lawsuit against the Internal Revenue Service who paid taxes on Tezos. However, the plaintiff has refused, or plans to refuse, a refund, which is being publicized in a way as political change. Instead, they insist on regulatory clarity. But the IRS hasn't really indicated that it will even bother to change the policy.

This lawsuit is explicitly about token staking, in which Tezos sued the IRS for clarity on how their staking rewards should be taxed. The argument here is that tokens obtained through proof-of-stake protocols are taxpayer-created property and should not be taxed until they are sold or exchanged. This begs the question, do crypto stakers stake and actually receive tokens from staking or if miners mine tokens/coins and don't sell or exchange them, do they have to pay taxes on it or not? This could be a massive and positive contributor to the crypto industry if stakers or miners don't have to pay taxes on what they stake or mine until they either sell the tokens or exchange them for others.