Russia Bans Cryptocurrency Mining in 10 Regions for Six Years Due to High Energy Consumption

Russia had legalized the mining of cryptocurrencies, including Bitcoin, in July 2024, with the new law officially taking effect in November. According to the legislation, all miners/mining farms are required to register with regulatory authorities and pay taxes.

However, smaller-scale individual and home miners are exempt from declaring, since their electricity consumption is relatively low. Large mining operations, on the other hand, are required to submit estimated electricity usage upon registration.

The primary reason behind the legalization of Bitcoin mining was Russia's need to rely on Bitcoin for international payments. Russia allows the use of Bitcoin only for transactions between domestic companies and foreign entities, with transactions within Russia still requiring the use of the ruble.

Unexpectedly, following the legalization of mining, a ban was introduced due to perhaps an overwhelming influx of new miners. The Russian Ministry of Digital Development has issued a prohibition on mining in 10 regions.

The new mining ban will take effect on January 1, 2025, and last until March 15, 2031. During periods of high energy demand, additional bans may be implemented in other unrestricted regions if deemed necessary by regulatory authorities, and existing mining bans could be temporarily lifted or altered if energy demands change.

In countries experiencing energy shortages, banning mining is not uncommon. However, Russia, with its abundant coal and natural gas resources, would theoretically have a sufficient electricity supply. The introduction of these restrictions suggests that some regions may have inadequate infrastructure to provide a continuous and stable power supply, necessitating limitations.

The restricted areas include several of Russia's remote federal subjects, such as Dagestan, North Ossetia–Alania, and the Chechen Republic, which were also sites for Russia's internet shutdown tests.

An interesting approach being considered is the subsidization of electricity between regions. These subsidies could lower the cost of electricity in certain areas, potentially attracting large mining farms to these regions with lower electricity prices, thereby fostering their development.