Russia has recently gained attention as a growing hotspot for cryptocurrency mining, with claims that its crypto mining hashrate is second only to that of the United States. Several factors contribute to this development, including favorable electricity tariffs, surplus energy reserves, proximity to China for equipment delivery, and relatively low taxes on company profits. However, the question remains: Is Russia truly the world’s second-largest crypto mining power?
Advantages of Mining Crypto in Russia
According to Nikita Zuborev, a Senior Analyst at the domestic crypto platform BestChange, mining crypto in Russia offers several advantages. One key advantage is the relatively low electricity tariffs, which are competitive compared to other regions worldwide. Certain regions in Russia, such as Irkutsk, Krasnoyarsk, Khakassia, and Dagestan, offer even lower tariffs, making them more attractive to miners. Additionally, some regions have surplus energy reserves, allowing miners to access electricity at favorable terms.
Moreover, Zuborev highlights that Russia benefits from “relatively” low taxes on company profits, which is appealing to mining firms. The nation’s proximity to China, the global leader in crypto mining equipment production, is another advantage. Direct rail links between Russia and China enable faster and more cost-effective delivery of mining hardware.
Assessing Russia’s Crypto Mining Power
While claims have been made regarding Russia’s position as the world’s second-largest crypto mining power, data from the Cambridge Centre for Alternative Finance Bitcoin electricity consumption index paints a different picture. The index from January 2022 projected Russia’s average monthly hashrate to be less than 5% of the global total. In comparison, the United States accounted for almost 38%, with neighboring countries Kazakhstan and China at over 13% and 21% respectively.
However, according to Russian mining giant BitRiver, Russia actually possesses around 1GW of crypto mining capacity, surpassing its neighboring countries. BitRiver attributes this to regulatory changes in Kazakhstan and a Chinese crackdown on mining in 2021, which have contributed to Russia’s rise in Bitcoin and altcoin hashrates. BitRiver claims that no other nation has more than 0.5GW of mining capacity at its disposal. The Gulf States have a combined 700MW, while Canada has 400MW.
Furthermore, BitRiver suggests that the United States’ position as the top mining country could be at risk due to factors such as rising electricity prices, declining mining profitability, and the abolition of tax incentives. The CEO of BitRiver, Igor Runets, mentions that many American miners purchased equipment on credit, leading to over-leveraged companies facing bankruptcy.
Russia’s Attractive Mining Conditions
Experts point out several favorable conditions that make Russia an attractive location for cryptocurrency miners. Ivona Gutovich, COO of Green Crypto Processing, highlights that Russia is one of the largest electricity producers globally, offering some of the lowest electricity prices. The cold climate in Russia also helps miners save on cooling costs for their mining farms.
Evgeny May, the founder of Cryptonomos, believes that as long as there is regulatory transparency and understanding in the sector, there will be enough investors in Russia willing to continue investing in crypto mining.
The Need for Legalization and Recent Developments
The Russian energy ministry has emphasized the need to expedite efforts to legalize crypto mining in the country. This indicates a recognition of the importance of regulating the industry to ensure its growth and development within the country’s legal framework.
In a separate development, Russian secret services arrested an individual in the Far East region on charges of treason, alleging that the person sent cryptocurrency to Ukraine’s armed forces. This incident highlights the complex landscape surrounding cryptocurrencies and the need for governments to establish clear regulations and guidelines.
In conclusion, Russia is experiencing a rise in cryptocurrency mining due to its advantageous conditions, including low electricity tariffs, surplus energy reserves, proximity to China, and favorable tax policies. While claims about Russia’s position as the second-largest crypto mining power require further scrutiny, the country possesses significant potential. As Russia focuses on legalizing and regulating the industry, it has the opportunity to further establish itself as a prominent player in the global crypto mining landscape.