Winter Power Strain Prompts Russia To Restrict Crypto Mining In Key Regions

Russia has taken steps to limit cryptocurrency mining in specific regions to address potential energy shortages during the winter months.

The government commission overseeing the country’s energy management announced a seasonal ban on mining activities in several Siberian regions.

Reason Behind The Seasonal Bans?

According to the report, the seasonal bans in multiple Siberian regions in Russia are because these areas are known for their affordable electricity due to their proximity to hydropower plants, which have made them hubs for mining operations.

The seasonal strain on the energy grid, coupled with Siberia’s harsh winters, has led authorities to prioritize domestic energy needs over industrial mining activities.

The restriction also extends to areas of Ukraine that Russia has declared “annexed.” Many of these regions have suffered significant damage to their energy infrastructure since 2022, causing frequent power outages.

With limited resources to rebuild the grid, authorities have deemed it necessary to curb energy-intensive activities like cryptocurrency mining.

These measures come as Russia continues to adjust several of its regulation rules on cryptocurrency since Russian President Vladimir Putin enacted a law permitting the experimental use of cryptocurrencies for international payments and foreign exchange transactions in July.

Notably, the Siberian regions near Lake Baikal are particularly affected by the ban, as they have become popular hubs for crypto mining due to low energy costs. Reports have it that hydropower plants in these areas have traditionally provided affordable electricity, attracting both domestic and international miners.

However, the increased consumption has created challenges for the local energy supply, particularly during winter, when demand surges for heating and other essential needs.

Prior to the finalization of this seasonal ban, Russia’s state news agency TASS already initially reported that this ban in specific areas of the country was going to take place. Yevgeny Grabchak, Deputy Head of the Ministry of Energy of the Russian Federation commenting on this development noted:

If we say that the forerunner of digitalization is mining, then mining will be banned at the state level in the near future in some regions. Anyone.

Meanwhile, Russia’s Ministry of Energy estimates that cryptocurrency mining consumes roughly 16 billion kilowatt-hours annually, equivalent to 1.5% of the country’s total electricity consumption.

Russia’s Continous Regulation Of Crypto

It is worth noting that this development comes at a time when the Russian government has recently implemented a 15% tax on all crypto mining and trading activities.

Particularly on November 18, the Russian government announced its “approval” of draft amendments to the bill addressing the taxation of income and expenses related to mining and trading digital assets. The Russian Finance Ministry highlighted the reason behind this move noting:

As a result of discussions with businesses, a decision was made on the advisability of taxing the financial result from mining as the fairest reflection of the results of this activity. This approach is aimed at observing a balance between the interests of businesses and the state.

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