Challenges of Cryptocurrency Mining Bans in Russian Regions

The prohibition of legal cryptocurrency mining in Russian regions is likely to increase the risk of some miners turning to illegal activities, according to experts cited by TASS.

Sergey Sasim, Director of the Centre for Research in Electric Power at the National Research University Higher School of Economics, described the government’s proposed restrictions as a “troubling signal.” He believes this will lead to the emergence of a “disparate mass of unscrupulous market participants.”

The expert attributes this to the high costs and inconvenience of relocating large enterprises from energy-deficient zones to areas with surplus generation.

“Under such conditions, predicting a mass shift in the geographical location of mining load centres is quite difficult. In the foreseeable future, leadership is likely to remain with the Siberian regions,” stated Sasim.

He urged regulators to abandon the “prohibitive tone of communications” and to establish more flexible interactions with legal miners to develop the industry.

Yury Stankevich, Deputy Chairman of the State Duma Committee on Energy, warned that miners are economically motivated to continue operations even in the “grey” zone.

“As long as mining remains sufficiently profitable for most players, the race for profit will continue,” he explained.

According to the Ministry of Energy, the energy consumption of Russian miners reaches about 2.7 GW per year, accounting for 2% of the total consumption of the entire population.

“Regions subject to the mining ban account for more than 70% of the total electricity consumption by miners,” added Gordey Smirnov, an analyst at Finam.

In the Irkutsk region alone, the industry requires 1 GW of electricity per year, with “grey” mining occupying about a third of the region’s total consumption.

Smirnov doubts that industrial data centres with significant computing power can operate covertly. Meanwhile, the lack of effective measures against shadow crypto farms limits the effectiveness of the mining ban, he concluded.

In July, basic regulation of cryptocurrency mining was adopted in Russia. ForkLog examined its impact on the industry in a separate article. The country also set an energy consumption limit for individual miners.

In November, the government approved restrictions on mining during the autumn-winter heating period in several regions from December 2024 to 2031. This list includes the Irkutsk region, certain areas of Buryatia and the Trans-Baikal Territory, as well as Dagestan, North Ossetia-Alania, Ingushetia, Chechnya, Kabardino-Balkaria, and Karachay-Cherkessia.

Previously, analysts compiled a list of Russian regions with low-cost mining.