Russia to Limit Cryptomining in Some Regions on Power Shortages

Russia restricted cryptocurrency mining in more than a dozen regions where the practice is concentrated amid concern over electricity shortages that are weighing on the nation’s economy.

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Bloomberg News

Bloomberg News

Published Nov 20, 2024  •  2 minute read

A cryptocurrency mining farm near Lake Baikal in Russia. Photographer: Andrey Rudakov/Bloomberg Photo by Andrey Rudakov /Bloomberg

(Bloomberg) — Russia restricted cryptocurrency mining in more than a dozen regions where the practice is concentrated amid concern over electricity shortages that are weighing on the nation’s economy. 

A government commission on the power industry approved a blanket cryptomining ban until 2031 for six regions in Russia’s Caucasus, as well as in some of the territories the Kremlin’s forces occupy in Ukraine, according to a statement published earlier this week.

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Officials also plan a six-year mining ban during peak winter power-consumption periods for three southeastern Siberian areas near Lake Baikal, it said.

The limitations are set to be imposed from Dec. 1, the Kommersant newspaper reported earlier this week. 

The areas facing restrictions are home to some of the nation’s major cryptominers, who benefit from cheaper electricity and easy access to the power grid. Overall, Russian cryptominers consume around 16 billion kilowatt-hours per year, or nearly 1.5% of Russia’s total electricity use, according to the nation’s Energy Ministry.

Russian cryptomining has been growing in recent years, spurred by an explosive rise in the price of Bitcoin and China’s 2021 decision to put its own blanket ban on the practice. 

International sanctions imposed over the February 2022 invasion of Ukraine have hampered traditional bank payments to and from Russia, which prompted the Kremlin to legalize cryptomining and allow a framework for testing digital tokens for cross-border transactions.

However, the boom comes as Russia’s military and industrial sectors have significantly increased their electricity use, fueled by war-related spending. 

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Russian officials, including President Vladimir Putin himself, have voiced repeated concerns over “uncontrolled growth” in electricity demand from cryptomining hubs, including in several regions covered by the bans.

Last year, the nation’s power consumption increased by 1.4% and is expected to grow by an average of 2.4% annually between 2025 and 2027, according to the Russian Power System Operator.

Heat waves in Russia’s southern and Caucasus areas this summer exposed vulnerability in the nation’s power grid and led to blackouts affecting as many as 2.5 million people.

Power Shortages

Earlier this week, the head of Russia’s Dagestan region, Sergei Melikov, asked the federal government to ban cryptomining in that area amid power-supply shortages. Dagestan’s power consumption jumped 26% over the past three years and is now leading to blackouts, he said in a statement on his Telegram channel.

Siberia’s Irkutsk region and Dagestan in the Caucasus have some of the lowest electricity prices in the country. That creates favorable conditions for cryptomining, Moscow-based ACRA rating agency said in a November report.

“Russia is facing power shortages over the next five to ten years,” said Ani Aslanyan, an analyst who runs a Telegram channel about cryptocurrencies. “The question is, does it makes sense to build new electricity capacity specifically for cryptominers?” 

Still, authorities are taking a subtle approach, she said. “They aren’t banning cryptomining outright, but rather creating conditions under which it becomes less attractive.”

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