Legal support for cryptocurrency mining
Mining comes from the English word “mining,” which means “mining.” Accordingly, digital currency miners are called miners. At its core, mining represents activities to maintain a distributed platform and create new blocks in the blockchain chain (blockchain) with the opportunity to receive a reward in the form of new units and commissions in various cryptocurrencies. Mining equipment calculations are required to protect the network from re-spending the same units (called double-spend), and the reward encourages people to spend their computing power and keep networks running. Mining today is not just the foundation of a new crypto-economy, but also a profitable and high-margin business.
However, not everyone prefers to engage in mining legally. And some mistakenly believe that in the absence of the definition of cryptocurrency and mining in the national legislation, there is no legal framework for the legal conduct of this kind of business. Others believe that, taking into account the position of the Central Bank and finmonitoring, which considers cryptocurrencies as a money surrogate, the turnover of which is prohibited, mining is an illegal activity. However, both the first and second judgments appear to be false. Providing services to provide computing power and solving mathematical algorithms with the help of their own equipment with the further creation of new blocks is not prohibited by current Ukrainian law.
At the same time, in the absence of appropriate timely legal actions, the mining business can have serious legal risks. Despite the absence of special regulatory requirements for the organization of mining mines and the operation of farms, the organizers of mining may face criminal liability under the Criminal Code of Ukraine – illegal business activities, tax evasion, and other administrative responsibility (in case the amount of damage/income is less than necessary for the Criminal Code) and the loss of expensive mining equipment.
Mining cryptocurrencies today are of several types: proof-of-stake mining, proof-of-work mining, subsistence, industrial mining, cloud mining, solo mining and mining in pools, mining with video cards and professional mining with the help of miners such as Asic L3. Today, both Bitcoin and Etherium, Dash, Litecoin and many other altcoins are mined. Depending on the type of mining, there are also different organizational and legal models of its design. But whatever the mining, it is obviously directed by its organizers to the sole purpose – generating profits in cryptocurrencies with its subsequent implementation for fiat funds.
This means that the miner needs a clear legal scheme in order not to have problems with law enforcement agencies and legally receive income in the form of dividends from mining activities.
Description of the service:
Business registration
Putting on the balance sheet of mining equipment;
Preparing recommendations on the accounting of cryptocurrencies as intangible assets;
Development of civil-legal contracts for the implementation of received cryptocurrencies;
advice on mining taxation.
The exact amount of necessary actions on the project is determined after studying the documentation and business scheme of the project, as well as consultation with the Customer.
The National Bank of Ukraine officially considers the “virtual currency/cryptocurrency” as a money surrogate, which has no real value. Hence the impossibility of using this unit by individuals and entities in Ukraine as a means of payment.
In addition, the National Bank notes, during the use of the “virtual currency/cryptocurrency” Bitcoin there is a serious threat – the high risk factor associated with the operation itself – anonymity (and the operation, among other things, may include cash), decentralization of conduct.
The NBU also emphasizes that all the risks of using the “virtual currency/cryptocurrency” Bitcoin in calculations are carried only by the participant of the calculations on them. At the same time, as a regulator of the financial services market in the country, the National Bank removes responsibility for possible risks and losses associated with the use of such a payment system.
The joint statement of the National Bank of Ukraine, the National Securities and Stock Market Commission and the National Commission, which regulates financial services markets, should also be taken into account.
We, the National Bank of Ukraine, the National Securities and Stock Market Commission and the National Commission, which regulates financial services markets, are convinced that the complex legal nature of cryptocurrency does not allow to recognize them neither with money, currency and payment of another country, nor currency value, nor electronic money, securities, or money surrogate.
At the same time, we, financial regulators of Ukraine, continue to work out the issue of the legal status of cryptocurrencies and the legislative settlement of transactions with them, taking into account the position of regulators of other countries and the latest trends in the development of such technologies. The purpose of such a settlement is to protect consumer rights, counter money laundering and other illegal activities, identify the subjects of operations (financial monitoring), the mechanism of taxation of received income, declaration and the like.
At the same time, we warn that any activity related to transactions of purchase, sale, exchange and conversion into cryptocurrency, carries a large number of risks, individuals and legal entities should be aware before carrying out transactions with cryptocurrencies. Anyone who plans to invest their own funds in cryptocurrencies should be aware of such transactions at their own risk.