In a large bowl, whisk together the flour, sugar, and salt. Dissolve the yeast in lukewarm milk and let it stand for 5-10 minutes, or until foamy.
Add the yeast mixture to the flour mixture, then stir in the egg, vanilla extract, and melted butter or margarine. Combine the ingredients, then knead into a soft, elastic dough.
Cover the dough with a clean kitchen towel and let it rise in a warm place for about 1 hour, or until doubled in size.
On a lightly floured surface, roll out the dough to about 1 cm thickness, then cut out small circles using a cookie cutter or glass.
In a large skillet, heat a generous amount of vegetable oil over medium heat. The oil is ready when a small piece of dough immediately starts to sizzle in it.
Fry the ponchiki until golden brown on both sides, about 2-3 minutes per side.
Place the fried ponchiki on paper towels to absorb excess oil, then sprinkle with powdered sugar while warm and serve.
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