Russia Seizes Bitcoin Mining Equipment in Incident at China Border

Russian authorities confiscated four bitcoin mining machines from an unidentified citizen last week at a security checkpoint located on its southern border with China.

A report from the Siberian Customs Department suggests that the individual attempted to bring "four undeclared metal objects", later identified as ROCKMINER R4 units, through a customs checkpoint at the Manzhouli Sino-Russian Inter-Trade Tourist Area.

However, the bitcoin miner failed to provide the necessary documentation or pay required fees for doing so.

The customs officers evoked a 2012 decision issued by the Board of Eurasian Economic Commission to validate the confiscation. The decision, amended in 2013 and 2014, governs the import and export of encryption facilities to and from Russia, Belarus and Kazakhstan, all of which are members of one customs agreement.

Despite the increasingly stern stance Russia has taken toward its domestic bitcoin industry in recent weeks, the incident appears to be unrelated to the country's proposed ban of "monetary surrogates". Further, it does not suggest a more immediate crackdown on bitcoin's domestic mining industry and community.

The draft bill, first announced in August, garnered even more headlines internationally last week as Russian lawmakers revealed the full text of the proposed law. If passed, the law would apply to virtually all of the country's industry, from individual bitcoin miners to bitcoin businesses and even news sites.

In addition to the loss of the mining units, the unidentified miner also faces potential fines, as the Siberian Customs Department indicated it has initiated administrative proceedings in the developing case.

Russian community reacts

Due to initial confusion surrounding the news, there was speculation on Russian bitcoin blogs that the incident was perhaps part of a more immediate crackdown by the local government on bitcoin activities.

Russian-language bitcoin news blog Coinside.ru, for example, wrote in its report that the news could be seen as "the start of the practical part of the Russian campaign against bitcoin".

However, Artem Tolkachev, managing partner at the law firm Tolkachev & Partners disagreed with this interpretation, noting that the initial news release suggests mining equipment is simply subject to the same special customs regulations as all types of encrypted materials.

"The document makes no special reference to the mining equipment, but it divides the encryption facilities into different groups and establishes the order of import and export," Tolkachev told CoinDesk.

Mining imports still possible

In absence of the formal approval of the draft bill banning bitcoin activities, Tolkachev asserted that, in his opinion, the import and export of bitcoin mining equipment is still legal in Russia provided the owner seeks a one-time license from the Ministry of Industry and Trade.

Still, the procedures required could prove to be a deterrent to local mining operators, especially in light of potential forthcoming regulation.

Tolkachev said:

"To get [a one-time license], one needs to present an application for a license, a copy of the equipment purchase contract, a copy of the certificate of registration with the tax authorities, license to conduct the activity (if needed), authorisation of the Federal Security Service (FSB), the description of all encryption facilities that the imported equipment contains."

Further, he said this procedure must be completed in 90 days, but that in some cases, only approval from the FSB is needed.

Tolkachev provides legal consultation to a number of regional startups, though he says most are now turning focus away from the Russian market in light of recent events.

Image credit: Pavel L Photo and Video / Shutterstock.com