Russia to Ban Crypto Mining In 10 Regions Citing Energy Concerns

Russia will ban cryptocurrency mining in 10 regions starting January 1, 2025, to address rising energy demands.

The ban, approved by the Cabinet of Ministers, will remain in effect until March 15, 2031, targeting areas with severe electricity shortages, as first reported by a local news outlet (TASS).

Regions affected include Dagestan, Ingushetia, Karachay-Cherkessia, Kabardino-Balkaria, Chechnya, North Ossetia, and the Zaporizhzhia and Kherson regions, along with the Donetsk and Lugansk People’s Republics. Participation in mining pools will also be restricted in these areas.

Additionally, mining operations in parts of the Irkutsk Region, Buryatia, and Zabaykalsky Krai will face temporary closures due to high energy consumption.

Despite President Vladimir Putin signing a bill in August to legalize crypto mining, the Cabinet of Ministers prioritized the restrictions to ensure energy stability during winter, as noted by The Crypto Times. The government justifies the move as a step toward balancing energy consumption and creating fairer business conditions across the country.

According to Vladimir Klimanov, Director of the Center for Regional Policy at the IPEI of the Presidential Academy, these measures aim to alleviate the burden on central Russia’s residents and businesses, who subsidize the low electricity tariffs in the North Caucasus and Far East regions, as reported by The Crypto Times.

The TASS reports that Sergey Kolobanov, deputy director at the Center for Strategic Research, explained that the ban on cryptocurrency mining is driven by regional electricity shortages and the current system of cross-subsidization.

Under this system, lower electricity rates in certain regions are effectively supported by higher costs borne by producers and consumers in other areas.

The TASS notes that The duration of the ban aligns with the planned phase-out of these regional electricity subsidies. Once the market is liberalized and energy capacity stabilizes, the restrictions may be reconsidered and potentially lifted.

Crypto.news notes that on November 18, Russia introduced a 15% tax on Bitcoin mining profits. The country’s current mining ban stems from ongoing energy shortages and regional electricity price disparities, according to a previous TASS report.

The World Energy Outlook 2023 highlighted that Russia’s power generation declined in 2022 due to reduced industrial demand and export sanctions, while electricity consumption surged by 5.8% in industrial regions by mid-2023, as noted by Crypto.news.

Regions with subsidized electricity, such as Irkutsk, where rates are as low as $0.01 per kWh, have become hubs for crypto miners, putting significant strain on power grids during winter peaks, as reported by Crypto.news.

While the ban is temporary, experts warn it may discourage Russian miners at a time of growing global interest in cryptocurrency, as noted by The Crypto Times.

However, as Blockhead noted, Russia is simultaneously ramping up Bitcoin use for international trade, despite restricting domestic mining, as confirmed by Finance Minister Anton Siluanov.

The new legal framework allows select entities to use cryptocurrency for cross-border payments, bypassing Western sanctions. This strategy also supports domestic energy companies by ensuring steady electricity demand from approved miners.