Russia has approved the ban on crypto mining in 6 regions until 2031. The reason is the shortage of power in these areas affecting the economy of the country.
The Russian Commission on Power Industry has announced the ban in 6 regions of Caucasus. This also includes the disputed territories that were taken over by the forces in Ukraine.
The announcement also says that there is a plan to ban three areas in southeastern Siberia near Lake Baikal for six years during extreme winters.
According to the Kommersant newspaper, The limitations will be in action from December 1st onwards.
Crypto mining consumes 1.5% of Russia’s electricity per year
Major crypto miners are situated in the areas under this ban. They had the benefits of cheaper electricity and an easily accessible power grid. In total, these mining structures have consumed electricity up to 16 billion kilowatt hours per year. As per the Russian Energy Ministry, this makes up 1.5% of the country’s total power consumption.
Crypto mining in Russia saw an increase after the price of Bitcoin increased rapidly and China deemed crypto-related activities illegal in 2021.
Furthermore, the international ban on traditional payments related to Russia following the Ukraine invasion in February 2022 motivated the Kremlin to allow crypto mining. This started the testing of digital tokens as a way for cross-border transactions.
In August this year, President Vladimir Putin signed a law legalizing the mining of cryptocurrency in the country under specific conditions. Crypto mining was an active industry in Russia even before the official legalization. It experienced a major boost around the time China banned the practice in 2021.
In a bid to further control the crypto mining process, President Vladimir Putin signed a legislation that will give the government the authority to ban mining in specific areas. This legislation became effective November 1 and is being enacted already.
No mining beyond this point
The limitations placed on crypto mining come after several power outages and blackouts affecting as many as 2.5 million people. Russian officials, including President Vladimir Putin, have repeatedly voiced concerns about “uncontrolled growth” in electricity demand from Russian crypto miners.
The areas facing restriction include the far east, southwestern Siberia, and other parts of the south that house the nation’s major mining operations. Crypto miners in these areas typically benefit from cheaper electricity and easy access to the power grid.
Overall, 16 billion kWh is consumed per year by crypto miners all over the country. This is about 1.5% of Russia’s total electricity use, according to its Energy Ministry.
Russia’s Dagestan and Siberia’s Irkutsk regions have some of the lowest electricity prices in the country, which is favorable for the crypto mining business. Dagestan’s power consumption has shot up by 26% in the last three years, and the area is now experiencing blackouts.
The head of the region, Sergei Melikov, asked the federal government to ban crypto mining in that area to put a stop to the power outages.
This is not crypto mining’s first rodeo
Cryptocurrency is no newcomer to bans, restrictions, and limitations. Russia is also not the first country to impose limits on crypto mining due to energy concerns. Countries like China and Iran have taken similar steps in the past.
Back in 2021, China placed a nationwide ban on all activities crypto-related, including mining, blockchain services, and cryptocurrency exchanges.
China’s blanket ban, unlike Russia’s was a result of a global cryptocurrency crackdown. There were also concerns that the energy-intensive process involved with crypto mining can hurt the environment.
Iran temporarily banned crypto mining due to its strain on the national power grid. The nation reinforces this ban during peak electricity demand periods, especially in the summer, to prevent blackouts.
Despite the limitations in place, Russia doesn’t intend to ban crypto mining outright. Rather, the East-European nation is “creating conditions under which it becomes less attractive.” as reported by Bloomberg.
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