Russia to ban cryptocurrency mining in some regions due to electricity shortages

The Russian government will begin banning cryptocurrency mining in certain regions in November as it struggles with electricity shortages amid its war with Ukraine, according to the country’s energy officials.

The new law imposing restrictions on both private and industrial miners was signed earlier in October, just a few months after Russia legalized virtual currency mining for legal entities and entrepreneurs.

Russia’s Deputy Minister of Energy Yevgeny Grabchak stated on Wednesday that in some regions of the country — including the Far East, southwestern Siberia, and Southern Russia — “miners have used up all available power capacity,” and new consumers will not be able to connect to the grid until at least 2030.

“Right now, the energy sector is in a situation where we're parasitizing on the legacy of the Soviet Union, and it will take years to develop new capacity,” the deputy minister said. He added that over the past two years, cryptominers have increased their consumption by 14%, exhausting available resources.

Russian President Vladimir Putin previously blamed cryptominers for the electricity shortages in Buryatia and the Irkutsk region. At that time, Russia’s energy ministry even proposed increasing tariffs for miners by five to ten times to avoid a deficit.

The previous law that legalized cryptocurrency mining imposed many bureaucratic burdens on those seeking to get involved. For example, interested parties had to submit their information to relevant Russian agencies to be tracked. Miners are also required to report their activities to the local financial monitoring service and provide their wallet addresses to Russia’s security services.

Russia’s ambitious crypto goal, outlined in a separate bill submitted in late July, is to allow the central bank to create an “experimental” infrastructure for using cryptocurrencies in cross-border payments.

These latest crypto regulations were introduced as global sanctions imposed on Moscow following its invasion of Ukraine continue to impact Russia’s economy. The sanctions have isolated Russian companies from the global dollar system and forced the Moscow Exchange to stop trading in U.S. dollars and euros.

One of the authors of the crypto bill, Anton Gorelkin, who serves as the deputy head of the committee on information policy, stated that Russian authorities view cryptocurrencies “primarily as a tool for circumventing sanctions.”

It is unclear how the future mining restrictions will impact Russia’s path to financial digitization, but the country’s deputy minister of energy indicated that it could hinder some progress in this field.