Russia is set to put a restriction on cryptocurrency mining, starting January 1, 2025. This decision will affect ten regions within the country and will last for six years, continuing through March 15, 2031. The policy is designed to address challenges related to energy consumption and electricity distribution, which have been strained by the growth of crypto mining operations.
The affected areas include several regions in the North Caucasus—Dagestan, Ingushetia, Kabardino-Balkaria, Karachay-Cherkessia, North Ossetia, and Chechnya—as well as the Donetsk and Lugansk People’s Republics, along with the Zaporizhia and Kherson regions.
These regions will experience a total prohibition on mining activities, including the use of mining pools. Russia’s government has identified these areas as having limited energy resources or critical needs for stable electricity distribution.
This move is part of Russia’s broader approach to regulating cryptocurrency activities. Earlier in 2024, the Russian government introduced laws that legalized and structured cryptocurrency mining at a federal level.
These regulations required miners to register with tax authorities and adhere to energy consumption limits. However, despite these efforts, mining activities in certain areas caused significant strain on energy supplies, particularly in regions with subsidized electricity costs.
To address these energy issues, the Russian government also plans seasonal restrictions on mining in specific Siberian regions. Areas such as Irkutsk, Buryatia, and Zabaikalsky Krai will face partial bans during the winter months, when energy demand is highest due to harsh weather conditions.
Initially, these restrictions will apply from January to mid-March in 2025, but subsequent years will see them extended from November to mid-March.
The underlying reasons for these bans go beyond electricity shortages. In many of the affected regions, electricity costs are kept artificially low through government subsidies.
This creates economic imbalances, as consumers and producers in other parts of Russia effectively bear the burden of these lower costs. Cryptocurrency miners have taken advantage of the low electricity costs in these regions, making the energy supply problems worse and forcing the government to step in and take action.
Russia’s approach reflects a growing global trend where countries grapple with the environmental and infrastructural impacts of cryptocurrency mining. Mining, especially for proof of work (PoW) cryptocurrencies like Bitcoin, requires substantial electricity due to the computational power needed to verify transactions and secure blockchain networks.
Countries with cheaper electricity often attract miners, but the resulting strain on infrastructure has prompted governments worldwide to reconsider their energy policies.
Sergey Kolobanov, a deputy director at the Center for Strategic Research, explained that the ban is not just about local electricity shortages but also about unfair electricity pricing in some regions. In these areas, low electricity costs are indirectly paid for by producers and consumers in other parts of Russia. This system, called “interregional cross-subsidization,” creates an imbalance.
The ban’s timing aligns with a plan to phase out these unfair subsidies. After the energy market is made fairer and balanced, the restrictions might be lifted if there is enough electricity capacity. Similarly, Vladimir Klimanov, another expert, highlighted that people and businesses in central Russia often end up covering the costs of low electricity prices in regions like the North Caucasus. He noted that the government’s measures aim to create fairer conditions for businesses across the country.
