Russia is planning to punish illegal bitcoin mining more harshly. Under new proposals, people who mine digital assets without proper registration could face hefty fines, forced labor, or prison sentences of up to five years.

The plan comes only a year after bitcoin mining was officially legalized in the country. The proposed changes were published by the Ministry of Justice in late December. If approved, they would change illegal mining from a minor offense into a serious crime under Russia’s Criminal Code.

Officials say the reason for the crackdown is simple: too many miners are ignoring the rules.

Russia legalized digital assets mining in 2024 to bring the industry under government control and into the tax system. Large and commercial miners were required to register with the Federal Tax Service, report how much digital assets they produce each month, and pay taxes.

Smaller miners were given more freedom. Individuals using less than 6,000 kilowatt-hours of electricity per month were allowed to mine without registering as businesses, but they still had to pay personal income tax on their earnings. Despite these rules, most miners have not complied.

Deputy Finance Minister Ivan Chebeskov said in June that only about 30% of miners had registered with tax authorities. This means most miners are still operating illegally or in what officials call a “gray zone.”

Finance Minister Anton Siluanov later told lawmakers that just 1,364 miners were officially registered across the entire country by the end of October. Authorities say this number is far too low for a country where mining has grown quickly, thanks to cheap electricity. Chebeskov said the goal of legalization was to bring mining “out of the shadows,” but that goal has not been achieved.

The new draft law would introduce a specific crime called “illegal mining of digital currency.” Mining would be considered illegal if it is done without registration and causes serious damage or earns large profits. For basic violations, miners could face fines of up to 1.5 million rubles (around $18,600), forced labor for up to two years, or up to 480 hours of compulsory labor for smaller cases. These penalties are much tougher than the fines currently used.

Much stronger punishments are planned for large-scale or organized mining operations. If mining brings in “significant” or “especially large” income, or if it is run by a group, courts could impose fines of up to 2.5 million rubles (over $30,000).

In these cases, judges could also sentence offenders to forced labor for up to five years or prison for up to five years, sometimes with extra fines added. The Justice Ministry said the harshest penalties would apply “if [a miner’s] actions cause major damage to citizens, organizations, or the state, or are associated with the extraction of income on a large scale.”

A major reason for the crackdown is electricity abuse. Illegal miners are often accused of stealing power or using huge amounts of electricity without paying the full costs. Russia’s state power company, Rosseti, reported losses of more than 1.3 billion rubles (over $16 million) in 2024 due to “black” mining. Regions such as Irkutsk, the North Caucasus, and parts of Siberia have experienced power shortages linked to underground mining farms.