Russia to ban crypto mining in several regions

The government will restrict the digital currency industry in areas with power shortages, a deputy prime minister has said

Electricity consumption by cryptocurrency mining could be useful, but only in areas where additional power capacity is available, Deputy Prime Minister Aleksandr Novak, whose portfolio includes energy, told RBK on Friday.

He was commenting on a recent initiative by the Russian government to impose restrictions on crypto mining in several regions facing electricity shortages.

Novak explained that crypto mining has a “positive effect on the evenness of power load and leads to a specific reduction in costs.” However, it has a downside when it “eats up” all available capacity, impeding the connection of new customers to the grid.

Kommersant cited a government document as saying that crypto mining could be restricted or completely banned in some regions in the Far East, southwestern Siberia, and Southern Russia, where miners have used up all available power capacity, from December this year until 2031.

Novak confirmed the plans, clarifying that mining will be limited in regions with existing or projected power shortages to ensure “socially important consumers” could be plugged in. 

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“In November we adopted a legal regulation,” the deputy prime minister said. “And we plan to add regions such as Irkutsk Region, its southern part, Buryatia, Transbaikal, and so on, to the list where mining is prohibited, because there is no free capacity there.”

According to official estimates, over the past two years cryptominers have increased their consumption by 14%, exhausting available resources. Last month, Deputy Energy Minister Yevgeny Grabchak said that Russia’s energy sector is in a situation where “we’re parasitizing” on the legacy of the Soviet Union, and that it will take years to develop new capacity.

Earlier this year, Russian President Vladimir Putin blamed cryptominers for shortages in Buryatia and Irkutsk regions, warning that “uncontrolled growth in electricity consumption for cryptocurrency mining could lead to power shortages.” 

The latest initiative comes after Russia adopted a law in October outlining mining activity rules for digital currency, including restrictions on entities or individuals engaged in the power industry.

Russia previously legalized virtual currency mining for legal entities and entrepreneurs. The legislation introduced concepts such as digital currency mining, mining pools, and mining infrastructure operators, and defined the rights and liabilities of participants in the crypto mining market.

Putin raised the issue of regulating cryptocurrencies and digital assets earlier this year, calling it a promising economic area and urging the creation of conditions for the circulation of digital assets, both domestically and with foreign partners.