The Russian State Duma approved a cryptocurrency tax bill in early 2021, but the bill has yet to move forward.

The Federal Tax Service of Russia (FTS) actively monitors the cryptocurrency market to prevent tax evasion, said Federal Tax Service head Daniil Egorov.

Cryptocurrencies have the potential to cause “significant erosion” of Russia’s tax base, Yegorov said in an interview with local publication RBC on Monday.

But crypto transactions are still being tracked and should be reported, the official said, adding that the FTS stands ready to deploy automated tracking systems to process large amounts of data.

“When you enter the digital space, you still leave traces somewhere. And the identification of this trace is a matter of time, ”said Yegorov.

The official also noted that the FTS is currently exploring ways to respond to cryptocurrency tax evasion practices, as authorities look to curb such activity rather than just expose it. “We want to find solutions that close the problem as a phenomenon and not just identify the actions of a specific player,” Egorov added.

The news comes shortly after the Bank of Russia last week proposed criminalizing “illegal trading in digital financial assets” as part of the country’s financial market targets for 2022 and the 2023-2024 period. As part of the proposal, the central bank wants to establish a procedure for taxing cryptocurrencies.

The State Duma of the Russian Federation approved a cryptocurrency tax law at first reading in February 2021, requiring residents to report cryptocurrency transactions totaling more than $7,800 per year. In order to advance to the second reading, deputies decided in mid-October to appoint a competent committee – the Budget and Taxation Committee of the State Duma.

According to Sergey Khitrov, founder of Russian cryptocurrency event Blockchain Life, the Russian crypto business has the potential to generate up to $4 billion in taxes a year. According to him, the local crypto community has so far shown a “complete inability” to understand how to pay taxes on crypto.

Related: House passes $1 trillion infrastructure bill with cryptocurrency tax for Biden approval

The news comes as U.S. lawmakers oppose changes to tax reporting rules for crypto transactions over $10,000 in a recently passed infrastructure bill. The bill was originally approved by the Senate in August, which encountered a compromise amendment proposal from a panel of six senators, including pro-Bitcoin (BTC) Senator Cynthia Lummis.

Source: CoinTelegraph