Russia is taking steps to prevent energy shortages during winter by restricting cryptocurrency mining in certain areas. Their energy oversight commission has put into effect seasonal bans of mining operations in specific Siberian regions.
The Rationale Behind Seasonal Restriction
Siberia’s decision to implement seasonal bans comes down to their regions’ easy access to affordable electricity from hydropower facilities nearby; this has made these areas attractive locations for cryptocurrency mining operations; however, winter season strains the energy supply further and thus necessitating prioritizing residential energy needs over industrial pursuits such as mining.
Additionally, this ban covers certain territories of Ukraine which Russia claims have been annexed and have experienced extensive infrastructure damage since 2022, leading to regular power disruptions and power outages. Due to limited resources for grid restoration efforts and curtailing high energy-consuming activities like crypto mining as a priority.
These steps align with Russia’s ongoing adjustments to its cryptocurrency regulations. Notably, President Vladimir Putin signed into law an initiative in July that allows for the experimental use of cryptocurrencies for international payments and foreign exchange transactions.
Siberia’s Lake Baikal region has been severely impacted by this ban, due to their low energy costs making them ideal for crypto mining. Hydropower plants in the region have historically provided affordable electricity that has drawn in both local and international miners alike. Unfortunately, this has put strain on energy supplies during winter when demand for heating increases sharply.
Before the seasonal ban was enforced, preliminary reports by Russia’s state news agency, TASS, detailed its impending implementation in certain regions. Furthermore, Yevgeny Grabchak of the Ministry of Energy of the Russian Federation signaled an imminent ban on mining as part of digitalization efforts throughout Russia.
Cryptocurrency mining in Russia is estimated by its Ministry of Energy to consume roughly 16 billion kilowatt-hours annually, accounting for 1.5% of total electricity usage.
Ongoing Crypto Regulation in Russia
Russia has recently implemented measures to more tightly regulate cryptocurrency activities. Most recently, they instituted a 15% tax on all crypto mining and trading activities and, on November 18th, approved draft amendments regarding taxing income and expenses related to digital asset mining and trading activities. Furthermore, the Finance Ministry credits discussions with business sectors as being influential in their decision to tax mining outcomes as this seeks to balance interests between companies and states.
