Trends in many countries related to strengthening tax control over legal entities and individuals, the history of the origin of funds and anti-money laundering legislation make the legalization of mining activities increasingly relevant.
Obtaining a license for mining holds significant value for several reasons:
Obtaining a license for mining holds significant value for several reasons:
- Legal Compliance:
A mining license ensures that the mining operation is in full compliance with local regulations and laws. This legal recognition protects the business from potential legal actions and fines.
- Legitimacy and Trust:
A licensed mining operation gains credibility and trust among stakeholders, including investors, customers, and partners. It demonstrates that the business is operating transparently and ethically.
- Access to Resources:
Licensing can provide access to essential resources and infrastructure, such as electricity at regulated rates and secure facilities. This access is crucial for the efficient and sustainable operation of mining activities.
- Government Support and Incentives:
Licensed mining operations may be eligible for various government support programs, subsidies, and incentives. These benefits can significantly reduce operational costs and increase profitability.
- Market Access:
In some jurisdictions, only licensed mining operations are allowed to participate in certain markets or trading platforms. Having a license ensures the business can fully engage in these opportunities.
- Operational Stability:
A license offers a framework for predictable and stable operations. It sets clear guidelines and standards that help manage risks and ensure the long-term viability of the mining business.
- Enhanced Security:
Licensed operations are often subject to regular inspections and audits, which help maintain high security standards and prevent illegal activities, such as money laundering or fraud.
On the territory of the Republic of Kazakhstan, there is an order of the Minister of Digital Development, Innovation and Aerospace Industry of the Republic of Kazakhstan dated April 28, 2023 No. 169 On approval of the Rules for licensing digital mining activities. These rules were developed in accordance with the laws “On Digital Assets in the Republic of Kazakhstan”, “On Public Services”, as well as “On Permits and Notifications”.
There are supposed to be 2 subtypes of licenses in accordance with the provisions of Chapter 2 of the Order.
Subtype I – carrying out digital mining activities by a digital miner who has a digital mining data processing center by right of ownership or other legal grounds;
Subtype II - carrying out digital mining activities by a digital miner who does not have a digital mining data processing center on the right of ownership or other legal grounds and carries out digital mining using a hardware and software complex for digital mining owned by him, located in a digital mining data processing center mining.
Procedure for obtaining a license:
There are supposed to be 2 subtypes of licenses in accordance with the provisions of Chapter 2 of the Order.
Subtype I – carrying out digital mining activities by a digital miner who has a digital mining data processing center by right of ownership or other legal grounds;
Subtype II - carrying out digital mining activities by a digital miner who does not have a digital mining data processing center on the right of ownership or other legal grounds and carries out digital mining using a hardware and software complex for digital mining owned by him, located in a digital mining data processing center mining.
Procedure for obtaining a license:
- Applicants submit an application through the e-government web portal to receive a public service in the established forms, as well as the information set out in the List of Basic Requirements for the Provision of Public Services.
- The completeness of the information is checked within 2 working days.
- If a complete package of documents is provided within 13 days, the submitted documents comply with the qualification requirements for carrying out digital mining activities and the list of documents confirming compliance with them. Within the specified period, a license to carry out digital mining activities is issued.
- corporate income tax (CIT) - 20%;
- value added tax (VAT) - 12%.
In accordance with the current legislation of the Russian Federation, the use of digital financial assets (hereinafter referred to as DFA) as a means of payment for goods, work, services, including in non-cash form, is expressly prohibited.
At the same time, the exchange of DFA for rubles through exchanges and Internet exchangers is formally allowed. However, as of July 2024, at the legislative level in the Russian Federation there are no rules for regulating cryptocurrency mining.
The Project is currently under consideration by the State Duma of the Russian Federation Federal law N 237585 - 8 "On amendments to certain legislative acts of the Russian Federation (regarding the regulation of digital currency)".
If this bill is further adopted, the procedure for carrying out activities for the extraction of digital financial assets (DFAs) in the Russian Federation will come into force, according to which a state register of miners will be created from September 1, 2024.
Legal entities and individual entrepreneurs wishing to carry out mining will need to enter information about their activities in this register, after which they will have the right to carry out mining.
Citizens who are not registered as individual entrepreneurs are allowed to mine DFAs without being included in the register, subject to compliance with the energy consumption limits established by the Government of the Russian Federation.
Within the framework of this bill, mining of digital currency is understood as the activity of carrying out mathematical calculations through the operation of technical means and software and hardware for making entries in an information system, including using distributed registry technology, with the goal of issuing digital currency and (or) receiving by a person, those carrying out mining of digital currency (including participants in the mining pool), rewards in digital currency for confirming entries in the information system.
In addition, within the framework of this bill, the Government of the Russian Federation, in the cases and procedures established by it, has the right to prohibit the mining of digital currency (including participation in a mining pool) in certain constituent entities of the Russian Federation or in their individual territories.
Thus, legal mining will require inclusion in the register of persons engaged in mining digital currency. Today, the legislation contains many gaps, and the bill has not yet entered into force, which is why proper regulation is not provided.
At the same time, the exchange of DFA for rubles through exchanges and Internet exchangers is formally allowed. However, as of July 2024, at the legislative level in the Russian Federation there are no rules for regulating cryptocurrency mining.
The Project is currently under consideration by the State Duma of the Russian Federation Federal law N 237585 - 8 "On amendments to certain legislative acts of the Russian Federation (regarding the regulation of digital currency)".
If this bill is further adopted, the procedure for carrying out activities for the extraction of digital financial assets (DFAs) in the Russian Federation will come into force, according to which a state register of miners will be created from September 1, 2024.
Legal entities and individual entrepreneurs wishing to carry out mining will need to enter information about their activities in this register, after which they will have the right to carry out mining.
Citizens who are not registered as individual entrepreneurs are allowed to mine DFAs without being included in the register, subject to compliance with the energy consumption limits established by the Government of the Russian Federation.
Within the framework of this bill, mining of digital currency is understood as the activity of carrying out mathematical calculations through the operation of technical means and software and hardware for making entries in an information system, including using distributed registry technology, with the goal of issuing digital currency and (or) receiving by a person, those carrying out mining of digital currency (including participants in the mining pool), rewards in digital currency for confirming entries in the information system.
In addition, within the framework of this bill, the Government of the Russian Federation, in the cases and procedures established by it, has the right to prohibit the mining of digital currency (including participation in a mining pool) in certain constituent entities of the Russian Federation or in their individual territories.
Thus, legal mining will require inclusion in the register of persons engaged in mining digital currency. Today, the legislation contains many gaps, and the bill has not yet entered into force, which is why proper regulation is not provided.
Regulation of cryptocurrency mining in Europe is diverse and lacks a unified focus, varying from country to country.
Some states, notably Germany and France, have introduced strict regulations and licensing requirements for miners, while Estonia has taken a more liberal approach.
The European Union is actively working to create clear rules for the cryptocurrency industry, including mining, which could entail the introduction of strict environmental standards, energy efficiency requirements for mining equipment and tax breaks for the use of renewable energy.
Germany
In Germany, profits from cryptocurrency mining may be subject to tax depending on the period of ownership of the asset before its sale. If the cryptocurrency was owned for more than one year, profits from its sale are exempt from tax. For miners engaged in activities for commercial purposes, income may be treated as business profits and subject to personal income tax or corporation tax depending on the form of business.
Licensing:
Individual miners generally do not require a special license, but commercial activities may be subject to registration and additional requirements.
The Federal Financial Supervisory Authority ( BaFin) acts as the main regulator of cryptocurrencies and mining in Germany. BaFin regulates cryptocurrency- related activities , including mining.
Estonia
Estonia, thanks to its progressive approach to regulating cryptocurrencies and blockchain technologies, is recognized as one of the leading digital countries in the European Union.
Individuals are required to declare income from mining, trading cryptocurrency, converting it into fiat, exchanging it for other cryptocurrencies and paying for goods and services. All income in cryptocurrency is taxed on the same basis as income in traditional currency.
Licensing:
Legal entities in the cryptocurrency industry fall under the jurisdiction of the National Financial Intelligence Unit (RAB), which licenses their activities.
Some states, notably Germany and France, have introduced strict regulations and licensing requirements for miners, while Estonia has taken a more liberal approach.
The European Union is actively working to create clear rules for the cryptocurrency industry, including mining, which could entail the introduction of strict environmental standards, energy efficiency requirements for mining equipment and tax breaks for the use of renewable energy.
Germany
In Germany, profits from cryptocurrency mining may be subject to tax depending on the period of ownership of the asset before its sale. If the cryptocurrency was owned for more than one year, profits from its sale are exempt from tax. For miners engaged in activities for commercial purposes, income may be treated as business profits and subject to personal income tax or corporation tax depending on the form of business.
Licensing:
Individual miners generally do not require a special license, but commercial activities may be subject to registration and additional requirements.
The Federal Financial Supervisory Authority ( BaFin) acts as the main regulator of cryptocurrencies and mining in Germany. BaFin regulates cryptocurrency- related activities , including mining.
Estonia
Estonia, thanks to its progressive approach to regulating cryptocurrencies and blockchain technologies, is recognized as one of the leading digital countries in the European Union.
Individuals are required to declare income from mining, trading cryptocurrency, converting it into fiat, exchanging it for other cryptocurrencies and paying for goods and services. All income in cryptocurrency is taxed on the same basis as income in traditional currency.
Licensing:
Legal entities in the cryptocurrency industry fall under the jurisdiction of the National Financial Intelligence Unit (RAB), which licenses their activities.
Financial licensing laws vary from state to state:
Alaska
In Alaska, legislation allows for the mining and exchange of cryptocurrencies with the appropriate license. However, the sale of cryptocurrency in Alaska is not subject to tax.
California
California, unlike Alaska, prohibits cryptocurrency mining. However, the state allows cryptocurrency exchanges, but with certain restrictions. There are no specific legal provisions regarding the taxation of cryptocurrency activities in California .
Ohio
In Ohio, there are basically no specific laws regulating cryptocurrency mining and exchange. That is, activities in this area are not prohibited, but also not regulated in any way. There are also no specific requirements for taxes on sales and use of cryptocurrency.
In some regions, cryptocurrency mining is classified as a type of remittance or financial service, requiring a license to operate legally.
This license is often called a Money Transmitter License License - MTL). In New York State, for example, Bitcoin miners are required to obtain a " BitLicense " designed specifically for companies working with virtual currencies. The introduced " BitLicense " regulates the activities of companies engaged in foreign exchange transactions, including mining, and requires a license from the New York State Department of Financial Services (NYDFS).
In the United States, according to IRS guidelines, cryptocurrencies are classified as property for tax purposes.
This means that profits or losses made from cryptocurrency mining are taxable as ordinary income or capital gains, depending on the period of holding the asset before selling it.
According to the IRS, cryptocurrency mining is considered a form of self-employment, which requires miners to declare their income as taxable income. Individuals in the United States have the right to engage in cryptocurrency mining without the need to create a legal entity.
Alaska
In Alaska, legislation allows for the mining and exchange of cryptocurrencies with the appropriate license. However, the sale of cryptocurrency in Alaska is not subject to tax.
California
California, unlike Alaska, prohibits cryptocurrency mining. However, the state allows cryptocurrency exchanges, but with certain restrictions. There are no specific legal provisions regarding the taxation of cryptocurrency activities in California .
Ohio
In Ohio, there are basically no specific laws regulating cryptocurrency mining and exchange. That is, activities in this area are not prohibited, but also not regulated in any way. There are also no specific requirements for taxes on sales and use of cryptocurrency.
In some regions, cryptocurrency mining is classified as a type of remittance or financial service, requiring a license to operate legally.
This license is often called a Money Transmitter License License - MTL). In New York State, for example, Bitcoin miners are required to obtain a " BitLicense " designed specifically for companies working with virtual currencies. The introduced " BitLicense " regulates the activities of companies engaged in foreign exchange transactions, including mining, and requires a license from the New York State Department of Financial Services (NYDFS).
In the United States, according to IRS guidelines, cryptocurrencies are classified as property for tax purposes.
This means that profits or losses made from cryptocurrency mining are taxable as ordinary income or capital gains, depending on the period of holding the asset before selling it.
According to the IRS, cryptocurrency mining is considered a form of self-employment, which requires miners to declare their income as taxable income. Individuals in the United States have the right to engage in cryptocurrency mining without the need to create a legal entity.
In the AIFC, the mining license is regulated by Astana Financial Services Authority (AFSA).
AFSA regulates financial services related to the operation of capital market infrastructure, including a regulated stock exchange, central securities depository and trading platforms.
Licensing stages:
AFSA regulates financial services related to the operation of capital market infrastructure, including a regulated stock exchange, central securities depository and trading platforms.
Licensing stages:
- Authorization / Approval in principle
Once AFSA is satisfied that an individual meets the eligibility criteria, AFSA will invite the individual to provide additional information required for assessment and approval.
If the application is successful, AFSA will notify the applicant of the status of the application and issue a letter of approval in principle.
- Company registration
A legal entity in the AIFC can be created in the following organizational and legal form:- Private Company
- Public Company
- Investment Company
- Restricted Company
- Special Purpose Company
- Limited Partnership
- General Partnership
- Limited Liability Partnership
- Private Foundation
- Non-profit organization (Non-Profit Incorporated Organization)
To register a legal entity in the AIFC, you must pay a fee of 300 US dollars.
Documents from the list must also be provided, namely:- company charter;
- partnership agreement;
- a person authorized to act on behalf of the company;
- director (one or more);
- chief executive officer;
- corporate secretary;
- beneficial owner;
- solution;
- KYC / AML policy;
After checking the submitted documents, the applicant receives a Certificate of Registration.
- Obtaining a license
According to the requirements of the AIFC, obtaining a license is the final stage of the procedure for creating a crypto company .
Before applying for a license, a company must pay a prescribed fee ranging from $5,000 to $125,000.
A study of the features of mining licenses in Russia, the USA, the European Union, Kazakhstan and the international financial center Astana allows us to see differences in approaches to regulating this industry in different jurisdictions. Each country has its own characteristics and requirements for licensing mining activities.
In Russia and Kazakhstan the emphasis is on mining control, while in the US and the European Union more attention is paid to the environmental and social aspects of mining. The Astana International Financial Center strives to create favorable conditions for the development of the mining industry by attracting investment and providing tax incentives.
In Russia and Kazakhstan the emphasis is on mining control, while in the US and the European Union more attention is paid to the environmental and social aspects of mining. The Astana International Financial Center strives to create favorable conditions for the development of the mining industry by attracting investment and providing tax incentives.
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