Introduction

Cryptocurrency mining involves using specialized computer hardware to solve complex mathematical problems, verifying transactions and generating new digital coins. The surge in Bitcoin and other cryptocurrency prices has attracted significant investment to mining activities. However, many countries lack clear legal frameworks, leading to inadequate regulation of the mining sector. Consequently, various nations have begun implementing relevant laws and regulations to foster the industry’s healthy development and address potential risks.

Crypto Mining Legislation in Major Countries and Regions

Russia

Legislation Overview: On July 30, 2024, the Russian legislature passed Bill No. 237585-8, which provides a clear legal framework for cryptocurrency mining. This bill will come into effect on November 1, 2024, marking the legalization of cryptocurrency mining in Russia.

What’s in the Bill?

• Legalized Mining Activities: The legislation explicitly allows cryptocurrency mining within Russia, requiring relevant businesses and individuals to comply with legal provisions.
• Registration and Licensing: Only legal entities and individual entrepreneurs registered with Russia’s Ministry of Digital Development can mine cryptocurrency. Individual citizens can mine without registration but must ensure their electricity consumption does not exceed government-imposed limits.
• Electricity Consumption Limits: Individuals engaging in mining must adhere to the government’s electricity consumption caps to avoid straining the power system.
• Regulation and Compliance: Miners must report information about the digital currencies they mine, including address identifiers, to government-authorized agencies. The law prohibits unlicensed entities from conducting mining activities in regions where it is legally restricted. Violators will face regulatory penalties.

Prohibitions and Restrictions:

• Advertising and Circulation Ban: The legislation bans advertising for cryptocurrencies and restricts the offering of cryptocurrencies to large groups of people.
• Regional Restrictions: The government reserves the right to prohibit cryptocurrency mining in certain regions to protect local environments and power resources.

Amendments to the Legal Frameworks:

The legislation introduces multiple amendments to existing laws, including the Federal Electric Power Industry Act and the law on Digital Financial Assets, Cryptocurrency, and Amendments to Certain Legislative Acts. These revisions aim to provide clearer legal grounds for mining activities, ensuring industry compliance and sustainable development.

China

Legislation Overview: The Chinese government has implemented strict regulatory measures on cryptocurrency mining activities. In September 2021, the National Development and Reform Commission (NDRC), along with 11 other departments, issued the Notice on Rectifying Virtual Currency “Mining” Activities, classifying cryptocurrency mining as an eliminated industry. This policy aims to optimize industrial structure, promote energy conservation and emission reduction, and support the country’s carbon peak and carbon neutrality goals.

What’s in the Bill?

• Eliminated Industry: The notice explicitly designates cryptocurrency mining as an eliminated industry, requiring rectification and elimination of existing mining projects while banning investment in new mining projects.
• Electricity Consumption Regulation: Mining activities are included in the differentiated electricity pricing policy, applying the electricity rate for “eliminated” enterprises. The surcharge standard is 0.3 yuan per kilowatt-hour, with local governments allowed to further increase the surcharge based on actual conditions.
• Administrative Penalties: Enterprises failing to exit on schedule will be ordered to cease production or shut down by national laws and regulations. Additionally, the government is intensifying efforts to crack down on cryptocurrency mining activities.

Prohibitions and Restrictions:

• Comprehensive Elimination: Local governments are required to clear existing cryptocurrency mining projects, particularly in resource-rich regions such as Inner Mongolia, Sichuan, and Qinghai. Measures include cutting power supply, disconnecting internet access, and confiscating equipment.
• Reporting Mechanism: Provinces have established reporting platforms for cryptocurrency mining enterprises, allowing the public to report violations and further strengthening regulatory enforcement.

Amendments to the Legal Framework:

• Legal Status: According to the Notice, virtual currencies do not hold the same legal status as fiat currencies, and related business activities are classified as illegal financial activities. This means all cryptocurrency-related transactions and mining activities are strictly restricted.
• Local Regulations: Various regions have introduced corresponding local regulations to enhance oversight of mining activities. For instance, Zhejiang Province issued a notice to rectify virtual currency mining equipment, outlining measures to confiscate non-compliant equipment.

United States

Regulatory policies for cryptocurrency mining vary widely across U.S. states. For example, Texas: Welcomes cryptocurrency mining with low electricity rates and tax incentives, attracting a large number of miners. New York has implemented a moratorium on new Bitcoin mining license applications to assess its environmental impact.

Legislation Overview of Texas Mining:

• Electricity Demand Forecast: The Electric Reliability Council of Texas (ERCOT) released a new five-year forecast in 2024, projecting that the state’s grid demand will nearly double by 2030. This growth is partly attributed to electricity demand from cryptocurrency mining and AI data centers.
• Legislative Background: Texas lawmakers are considering new legal frameworks to address the impact of cryptocurrency mining on the power grid. Lieutenant Governor Dan Patrick emphasized that priority should be given to the electricity needs of residents and businesses over serving high-energy industries.

Key Regulations and Policies:

• Licensing System: Texas requires all cryptocurrency mining enterprises to apply for relevant licenses to ensure compliance with electricity supply and environmental protection standards.
• Electricity Usage Restrictions: New regulations may impose stricter electricity usage limits on high-energy data centers and mining facilities to prevent excessive strain on the grid. This includes restricting electricity usage for certain facilities during peak demand periods.
• Environmental Impact Assessment: To ensure sustainable development, Texas may require new mining facilities to conduct environmental impact assessments to evaluate their potential effects on the local ecosystem and power system.

Challenges Facing the Mining Industry:

• High Energy Consumption: The growth of the cryptocurrency market has placed significant pressure on the power system. ERCOT predicts that cryptocurrency mining will account for half of the future growth in electricity demand, raising concerns among the public and legislators about energy consumption.
• Regulatory Uncertainty: Although Texas currently maintains an open stance on cryptocurrency mining, future policies may impose stricter regulations, creating a degree of uncertainty for industry participants.

Key Contents of New York State’s Cryptocurrency Mining Legislation:

Legislative Background: In 2022, New York State implemented a temporary ban on new Bitcoin mining license applications to assess the environmental impact of mining activities. This moratorium represents an important step in the state government’s efforts to regulate cryptocurrency mining, reflecting its focus on sustainable development.

Key Provisions:

• Environmental Impact Assessment: The legislation requires all new mining license applications to undergo an environmental impact assessment to ensure mining activities do not negatively affect the local ecosystem. This measure aims to promote the use of green energy and reduce carbon emissions.
• Licensing System: All cryptocurrency mining businesses must apply for a license and undergo review by the relevant regulatory agencies. This system helps ensure mining activities are compliant with state environmental protection standards.
• Electricity Usage Restrictions: The legislation may impose electricity usage limits on high-energy mining facilities to prevent excessive pressure on the power supply. This measure seeks to prioritize the electricity needs of residents and businesses.
• Renewable Energy Requirements: New York State encourages mining companies to use renewable energy to minimize environmental impact. The legislation may include incentives to support projects that adopt clean energy sources, such as solar and wind power.

Impact on the Industry:

• Increased Compliance Costs: The new legislation could lead to higher compliance costs for mining companies, particularly in environmental impact assessments and license applications. This may force smaller miners out of the market, potentially exacerbating centralization trends.
• Market Competitiveness: Strict regulatory policies could reduce New York State’s competitiveness in the global cryptocurrency mining market. Some miners may choose to relocate to states with more lenient regulations, such as Texas or Wyoming.
• Opportunities for Green Transformation: Despite the challenges, the legislation presents an opportunity for the mining industry to transition toward sustainable development. By adopting clean energy and improving energy efficiency, mining companies can comply with regulations while reducing operating costs.

Canada

Legislation Overview: Canada does not have specific laws dedicated to cryptocurrency mining but manages the activity through existing mining regulations and policies. In recent years, the federal government has recognized the economic significance of cryptocurrency mining and has started implementing measures to promote the healthy development of the industry. The government aims to establish an efficient, transparent, and predictable regulatory environment to attract investment and support sustainable growth.

What’s in the Bill:

• Regulatory Framework: The Canadian government is advancing the Canadian Critical Minerals Strategy, which aims to stimulate mining investment, accelerate project development, and promote stakeholder engagement. The strategy includes tax credits and financial support to encourage exploration and development of critical minerals.
• Licensing and Approvals: The licensing process for new mines is set to complete impact assessments and approvals within five years or less, and non-federally designated projects within two years. This target is designed to reduce project approval times and enhance predictability.
• Tax Incentives: The government provides several tax credits, such as a 15% mineral exploration tax credit and a 30% critical mineral exploration tax credit, to encourage companies to invest in exploration and development.

Prohibitions and Restrictions:

• Environmental Protection: While mining activities are not explicitly prohibited, the government imposes strict environmental requirements. All new mining facilities must undergo environmental impact assessments to ensure their operations do not negatively affect the ecosystem.
• Electricity Usage Restrictions: Certain provinces, such as Quebec, have implemented electricity usage restrictions on high-energy mining activities. During times of power supply constraints, electricity allocation for new mining projects may be limited.

Amendments to the Legal Framework:

• Legal Applicability: Canada currently lacks laws specifically targeting cryptocurrency mining. However, relevant legislation, such as the Canadian Criminal Code and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, applies to mining activities to ensure compliance.
• Policy Adjustments: As the market evolves, the Canadian government may adjust existing policies to better support the cryptocurrency mining industry based on industry needs and technological advancements. For instance, new regulations may be introduced to clarify mining activities’ legality and regulatory requirements.

Kazakhstan

Legal Background: Kazakhstan is one of the world’s major Bitcoin mining hubs. As mining activities have increased, the government has recognized the need for proper regulation to ensure stable power supply and environmental protection.

What’s in the Bill?

• Registration and Licensing: All cryptocurrency mining enterprises must register with the Ministry of National Economy of Kazakhstan and obtain the necessary licenses. This regulation aims to ensure the legality and compliance of mining activities.
• Electricity Usage Regulation: Kazakhstan government has implemented a power quota system for mining activities, requiring miners to adhere to specific electricity usage limits to prevent shortages caused by excessive power consumption.
• Tax Policies: Mining companies are required to pay taxes in accordance with relevant laws, including but not limited to value-added tax (VAT) and corporate income tax. Additionally, the government is considering imposing additional taxes on cryptocurrency mining to address power shortages caused by mining activities.
• Environmental Protection Requirements: All new mining facilities must undergo environmental impact assessments to ensure their operations do not negatively affect the local ecosystem. This measure is intended to promote sustainable development and reduce carbon emissions.

Government Support and Challenges:

• Government Support: Despite the regulatory measures, Kazakhstan aims to attract foreign investment and technology to promote the development of its cryptocurrency mining industry through reasonable policies. The government has stated that it will support legal and compliant mining enterprises to foster economic diversification.
• Challenges: Due to the surge in electricity demand, Kazakhstan faces power shortages in some regions. The government may restrict new mining projects in areas with tight power supplies to prioritize the electricity needs of residents and businesses.

Europe

In Europe, multiple countries have established regulations for cryptocurrency mining, although regulatory frameworks and policies vary across nations. Below are the mining-related laws and regulations of key countries:

EU Regulatory Framework:

The European Commission is working to establish a unified regulatory framework for cryptocurrencies, including mining activities. The Markets in Crypto-Assets Regulation (MiCA), proposed in 2020, aims to set rules for crypto-asset issuers and service providers across all member states. It seeks to enhance transparency, prevent money laundering, and protect consumers. While MiCA primarily focuses on issuing and trading crypto-assets, it indirectly impacts mining activities. \

Lithuania:

Lithuania does not have direct regulations or specific laws for cryptocurrency mining. However, mining income may be treated as business income and is subject to general income tax rules. The Lithuanian government emphasizes supporting financial technology innovation while ensuring compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) laws.

Austria:

Austria considers cryptocurrency mining an economic activity that may be subject to taxation. If mining is classified as a business activity, the income derived is taxed according to applicable income tax rates. Related costs, such as electricity and equipment expenses, can be deducted when calculating taxable profits.

Belgium:

In Belgium, if cryptocurrency mining is deemed a professional activity, mining income is subject to personal income tax. In this case, mining earnings are taxed according to personal income tax rates, and mining-related expenses can be deducted from taxable income.

Bulgaria:

Bulgaria has tax provisions for cryptocurrency mining. If mining activities are not classified as business or professional activities, income is taxed at a 10% personal income tax rate. The income may be subject to a 10% corporate income tax rate if considered a business activity.

Croatia:

Croatia currently lacks specific legislation for cryptocurrency mining but generally requires mining and crypto transactions to comply with existing financial regulations. The government is considering how best to regulate the industry to promote lawful and compliant growth.

European countries have differing legal approaches to cryptocurrency mining. The overall trend is toward strengthening regulation to ensure compliance and sustainable development. While some countries have yet to introduce dedicated mining legislation, existing tax laws and financial regulations provide a degree of oversight for mining activities. As the industry evolves, more countries are expected to introduce specific laws and regulations to manage cryptocurrency mining.

Impact on the Industry

Positive Impacts

• Trust from Legalization: A clear legal framework guides the industry, helping attract more investors to the market.
• Promotion of Sustainable Development: Setting limits on electricity usage and implementing environmental protection measures can drive the adoption of green energy.

Negative Impacts

• Increased Compliance Costs: Businesses must allocate funds to meet compliance requirements, which could force smaller miners out of the market.
• Regulatory Uncertainty: Variations in policies across different countries and regions create challenges for international operations.

Future Outlook

As global regulatory efforts around the cryptocurrency industry intensify, cryptocurrency mining legislation will continue to evolve. More countries are expected to adopt similar measures to ensure healthy industry development. Meanwhile, technological advancements will increasingly integrate green energy and sustainability concepts into mining activities, offering new opportunities for the industry.

Conclusion

Cryptocurrency mining, as an emerging industry, is gradually being shaped by evolving legal regulations. Legislation provides necessary guidance for the industry, which not only helps protect investors’ interests but also promotes sustainable development. In the future, cryptocurrency mining will play an increasingly important role in the global economy. However, striking a balance between regulation and innovation will remain a critical challenge for governments worldwide.