The Russian government has approved a bill regulating the taxation of crypto transactions. What will now change in the country’s tax base?

The Russian government has passed a bill regulating cryptocurrency taxation. Prepared by the Ministry of Finance, the bill gives crypto property status, as local media reports. This means companies must pay income tax on crypto transactions, while individuals will be subject to personal income tax.

The rate for Russian citizens will vary from next year depending on their income — from 13% to 22%. Crypto transactions will not be subject to value-added tax though. Citizens and legal entities must report crypto transactions to the Federal Tax Service if receipts and write-offs exceed 600,000 rubles per year (about $6,000 as of press time).

Crypto mining infrastructure operators will be required to transfer data on the services rendered to the tax service. If the information is not received within the specified period, the site will face a fine of 40,000 rubles (about $400). It is noteworthy that the bill was prepared back in December 2020, but back then its consideration stalled. The adoption of the provision appeared after crypto mining was legalized in Russia on Nov. 1, 2024. After registering in a special register of the tax service, companies and individual entrepreneurs can mine crypto (e.g. Bitcoin).

How will the tax on profits from crypto be paid?

The tax on mining profits will involve two steps. First, miners will make an advance payment when receiving cryptocurrency in their wallets. Then, an additional tax will apply when the digital assets are sold. If the value of the mined coins increases after the initial payment, miners will owe more tax. Conversely, if the value drops, overpayments can be recorded as losses.

According to the latest proposal from the Russian Ministry of Finance, the tax rate for the sale of cryptocurrencies may be 13% starting in 2025 and 15% if the citizen’s income exceeds 2.4 million rubles (about $24,000) annually. As Russian state-controlled media Interfax reports, digital currency is recognized as property for the purposes of the Tax Code.

The same principle was included in the bill during its first reading, which took place more than three years ago. Income from transactions with digital currency will be included in the general tax base along with revenue from the sale of shares, bonds, investment units, repo transactions with securities, and income from transactions with securities in individual investment accounts and deposits in Russian banks. This will come into force in 2025.

If an individual’s total annual income from all these sources does not exceed 2.4 million rubles, then the personal income tax will be 13%. If this amount is exceeded, the tax will be 15% of the amount exceeding 2.4 million rubles, plus a fixed amount of 312,000 rubles (about $3,100), corresponding to 13% of 2.4 million rubles. In addition, the ministry will determine the amount of tax as follows: the tax base will be determined based on the market price of the digital currency at the time of receiving income.

Foreign trading organizations will set the market price (closing price) based on transactions concluded during the day. Foreign trading organizations are those whose digital currency trading volume exceeds 100 billion rubles ($1 billion) per day.

If transactions for the same cryptocurrency were carried out on two or more foreign crypto exchanges, the taxpayer can independently choose the market price. In this case, the proceeds from the sale of cryptocurrency will be calculated based on the actual selling price, but not lower than the market price reduced by 20%.

Russia follows North America’s path

The media noted that the mechanism for paying taxes on cryptocurrency is formed according to the North American approach.

As Oleg Ogienko, deputy director general for communications at BitRiver, explained, the miner’s profit tax is levied upon receipt of crypto in a wallet minus reasonable and documented expenses. Miners may also reclaim part of the tax paid if their expenses are proven necessary.

“As far as can be seen, the proposed mechanism is formed according to the North American approach. That is. First, the miner’s profit tax is levied upon receipt of cryptocurrency in his wallet, minus reasonable and documented expenses. Then, the miner’s capital gains tax is levied when the cryptocurrency is disposed of from its original wallet.”

Oleg Ogienko

Unlike Russia, U.S. taxation varies based on how long the cryptocurrency is held. Short-term holdings are taxed at rates between 10% and 37%, depending on income. Long-term holders enjoy lower rates of 0%, 15%, or 20%.

The closing weeks of 2024 saw vintage crypto wallets waking and moving tens and hundreds of tokens to exchanges or other addresses. Public curiosity is by far not the only impact of such transactions. Let’s see how the whale transactions influence the market and why not everyone is happy about them.

The whales’ transactions Christmas rampage

On Dec. 25, 2024, the Bitcoin wallet that was kept untouched for nearly 14 years moved 20.55 BTC to another address. During the years in the wallet, these coins gained over $2 million in value. The same day, a different wallet released 210 BTC after ten years of inactivity. This BTC stash grew by $20 million while being hodled.

Two days later, someone moved 1,940 ETH from the pre-mine address to Coinbase. These ether tokens were dormant from the launch of the Ethereum network. The following days saw other huge transactions involving long-time sleepers. 

For instance, on Dec. 29 it was reported that someone sent 7,000 BTC from the address that was inactive for seven years to several different addresses, splitting the sum into seven 1,000 BTC outputs. 

Reporters share the opinion that these bitcoins weren’t sold; they just moved to other wallets. In seven years, the 7k BTC stash value grew by several hundred million dollars. On the same day, the address that had been silent since 2014 sent 357.4 BTC to other addresses.

When whales hold

As of Dec. 30, 2024, there are four wallets holding nearly 650k BTC, which is over 3% of the total supply. All of these addresses are the cold wallets of the crypto exchanges. According to the Bitinfocharts tool, less than 100 Bitcoin addresses hold around 15% of the entire supply; many of these addresses probably belong to individuals. If they decide to move their millions worth of crypto coins, it may trigger a bearish reversal even in the uptrend.  

When whales hold their crypto, they decrease its liquidity. Just think of billions worth of cryptocurrency that has not moved for years! Almost half of all bitcoins are held in wallets that have between 100 and 10,000 bitcoins on the balance. This group of whales impacts liquidity and value the most. Many of them haven’t moved crypto for years, sometimes over 10 consecutive years, effectively keeping large amounts of crypto out of the market.

When whales sell

When whales get rid of their crypto, they signal other investors that someone who held millions worth of the asset in question decided that the asset isn’t worth it anymore. And everyone sees it! 

The whales’ transactions don’t go unnoticed, as thanks to the Bitcoin network’s transparency, these addresses are known, listed, and monitored. Each massive transaction makes headlines and triggers much talk on the Internet. Some people, especially those who don’t follow the trading/investment strategy or even don’t have one, fall for emotions and start to panic. When many people panic simultaneously, they may flip the market or increase the price volatility – not necessarily for a long period, but still. The whales who don’t want to cause disturbance dump their crypto gradually.

Most transactions described in the previous chapter seemingly have one goal–the owners move crypto from the legacy Pay-to-Public-Key-Hash (P2PKH) addresses to modern wallets that provide better privacy and security. They cannot be attributed to so-called “whale dumping” that serves as a bearish signal.

Alleged market manipulations

On Dec. 27, 2024, the “Rich Dad Poor Dad” author, Robert Kiyosaki, took to X to accuse the BlackRock CEO Larry Fink of dumping Bitcoin. According to Kiyosaki, BlackRock is “suppressing Bitcoin price, so the whales can buy Bitcoin at under $100k.”

Although we don’t have evidence to support or dispute Kiyosaki’s claim, we must admit that institutions and individuals holding large amounts of crypto are often subjected to such claims. The alleged market manipulation conducted by Tether is one of the best-known cases. The battle for the truth continues as of December 2024.

Why would someone accuse whales of intentional price manipulations? First off, whales really can impact the prices. Whales may sell a large amount of BTC, sending the price down, re-buy what was sold during retracement at a discounted price, and enjoy profit made out of the price differences. Other tactics available for whales include rug pulls and wash trading. 

Ripple Labs admitted having used trading bots in the past. However, it doesn’t outrightly agree with the accusations of using them to manipulate the XRP price.

Crypto whales: friends or foes?

Just like the natural whales in the oceans, crypto whales are not friends or foes. Rather, they are large bodies minding their own business. If we know how they impact the market when they spend crypto, we can react to the whale alerts accordingly and avoid trouble. The only exception is the whales consciously manipulating the prices. However, the same means, namely, preparedness and caution, may save us from them too.

Three of the 50 states of America are expected to create local Bitcoin reserves soon. The bills differ from the proposal of the American National Bitcoin Reserve and demonstrate local specifics.

America is bullish on Bitcoin. Allegedly, each fifth American owns some BTC. While the U.S. President is pushing to create a strategic Bitcoin reserve, the states are working on local reserves. The Ohio and Texas proposals to create such reserves are about to pass; Pennsylvania is following their way, while other states are doing their considerations.

What are the specs of the local proposals compared to the federal bill?

The main distinction is that the local proposals have different end goals if compared to the federal-level proposal. The federal bill is aimed to cover the national debt and calls for purchasing one million BTC that should be stored in the U.S. Treasury. 

The Texas bill is aimed at accumulating bitcoins by collecting taxes and donations in cryptocurrency. More than that, Texas has a minimum five-year embargo on selling state bitcoins. Ohio and Pennsylvania are willing to accumulate some BTC as a hedge against the eroding USD value. Bitcoins must be bought by the local treasuries. The bills don’t elaborate precisely on the terms.

The Cynthia Lummis bill

The Federal Reserve bill was introduced in July 2024 by Wyoming Sen. Cynthia Lummis. Her proposal is called Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide (BITCOIN) Act. The Lummis bill is expressly presented as a means to pay down the U.S. national debt. 

Apart from national debt, Lummis mentions soaring inflation rates in the introduction and calls the creation of the reserve a Louisiana Purchase moment. Comparing huge-scale Bitcoin purchases with buying American lands in the past became a popular trope among Bitcoin maximalists.

According to the Lummis proposal, Bitcoin is seen as an additional store of value in the federal balance sheet. The bill suggests that the government must establish a U.S. Treasury-controlled decentralized network of Bitcoin vaults. On top of that, the government must purchase one million BTC, which is around 5% of the total supply. The amount is dictated by the fact that the U.S. is already holding 5% of all gold. Private Bitcoin holders should be given self-custody rights. 

The local bills

The local bills of Texas and Ohio don’t include direct intentions to purchase a specified amount of BTC in a certain period, nor are they intended to eliminate the state debts.