In Russia the mining of Bitcoin has been banned in 10 regions until March 2031.
The official Russian news agency Tass reported it with a statement published a few days ago.
Bitcoin mining in Russia
According to the data from Chain Bulletin, in Russia the mining farms collectively have 4.6% of the global hashrate.
It is a high percentage, but not the highest, considering that the highest percentage is held by the USA with almost 38%. In second position is China, with 21%, and in third is Kazakhstan with 13%.
Russia is in fifth place behind Canada (6.5%).
What is surprising is the comparison with neighboring Kazakhstan, where the hashrate is almost three times greater than that of Russia.
Russia has an area six times larger than that of Kazakhstan, and a population seven times larger.
Furthermore, regarding the extraction of fossil hydrocarbons, Russia produces quantities almost ten times higher than those of Kazakhstan.
However, when China banned the mining of Bitcoin in 2021, many Chinese miners moved to neighboring Kazakhstan, and this explains the apparent disproportion between the Russian hashrate and the Kazakh one.
It should not be forgotten that Bitcoin mining consumes a lot of electricity, and therefore countries where electricity is cheap (for example, because they are large producers of hydrocarbons) are favored.
The problem of Bitcoin mining in Russia
As stated in the Tass release, the Russian government has banned crypto mining in 10 regions precisely to maintain a balance in energy consumption, taking into account the needs of the industry.
So the problem comes from a potential shortage of electricity, which in some areas of Russia might not be able to meet the entire demand of the industry.
The solution adopted to prevent this shortage from creating problems is to prevent crypto miners from consuming electricity in those regions where there is not enough for everyone.
The ban will come into effect on January 1, 2025, and will last until March 15, 2031.
The regions involved in this initiative are: Daghestan, Ingushetia, Kabardino-Balkaria, Karachay-Cherkessia, North Ossetia, Chechnya, Donetsk, Lugansk, and the republics of the regions of Zaporozhye and Kherson.
In other regions, such as Irkutsk, Buryatia, and the Trans-Baikal territory, the ban will be only temporary and will be enforced only during peak energy consumption periods, namely from November 15 to March 15.
However, the government has specified that this list is not final and may be adjusted in the future based on the decisions of the government commission for the development of the bull industry and bear electric energy.
Note that only in November crypto mining was legalized in Russia, subject to the provision of information on the digital assets collected and the public addresses used.
The underlying problem
According to the deputy director of the Center for the Economy of the Fuel and Energy Sectors, Sergei Kolobanov, the ban is associated both with the shortage of electricity in certain territories and with interregional cross-subsidies, which compensate for the low electricity costs with regulated contracts with producers and consumers from other regions.
The idea expressed by Kolobanov is that, if a market liberalization were to be completed with the elimination of these subsidies, the restrictions on crypto mining could be removed, if there is sufficient power to afford it.
However, the date set for the end of the ban, 2031, suggests that it will not be a fast process at all.
The director of the Center for Regional Policy of the IPEI of the Presidential Academy, Vladimir Klimanov, added that the residents and businesses of the center of Russia pay a part of the costs resulting from the low electricity tariffs in the regions of the Northern Caucasus or the Far East, and the measures introduced by the government serve to create fairer conditions for doing business in such a specific area of the immense Russian territory.
It remains at least curious that one of the largest producers of hydrocarbons in the world does not have enough electricity for everyone.
Russia and Bitcoin
The relationship between Russia and Bitcoin has never been easy.
On the other hand, a free currency, which cannot be controlled in any way by the State, is not very popular with authoritarian regimes like the Russian one.
Recently, the Russian government itself has declared that it is trying to use cryptocurrencies to circumvent international sanctions on payments.
In particular, he stated that they will use the Bitcoins mined through mining, even if after the aforementioned ban, the extraction of BTC will surely decrease.
With 4.6% of the hashrate, they should be able to mine 4.6% of the BTC that are being extracted during this period.
This is a total of less than 21 BTC per day, or less than two million dollars, a figure not particularly high, even though over the course of a year it reaches about 700 million.
In other terms, although 2024 seemed to be the year of the definitive acceptance of crypto in Russia, some problems in the country remain from this point of view, to the extent that it requires direct intervention from the State.
