Bitcoin and crypto mining costs could rise in Russia if regions complain

View of Lake Baikal in Irkutsk Oblast, Russia. Source: Adobe / Andrey Shevchenko

Bitcoin (BTC) and crypto mining are causing electricity shortages in parts of Russia – and political leaders are stepping in with interventions that could aim to limit miners’ output or increase their energy bills.

Per Vedemosti, Igor Kobzev, the governor of Irkutsk Oblast in south-east Siberia, wrote a letter to Deputy Prime Minister Alexander Novak complaining about “illegal cryptocurrency miners” operating in the region – and declaring that they have spikes in consumption cause.

Novak was Energy Minister from 2012 until last year when he was appointed Deputy Prime Minister. However, he still has considerable power over the energy industry – and there are signs that his successor may be ready to respond with new tariffs for miners.

Energy prices in Siberia are known to be low, and the constant cold temperatures for much of the year have drawn numerous miners to Irkutsk Oblast and the surrounding area, especially since China started mining earlier this year.

But the ministry and Novak’s successor Nikolai Shulginov seem to have accepted Kobev and others’ concerns and may respond with new price increases for crypto miners.

RBC reported that Shulginov stated:

“In order to maintain a reliable and high quality power supply, we believe it is necessary to prevent miners from consuming electricity through energy tariffs [intended] for the [general] Population.”

The minister added that “miners do not” […] the situation worsens through the use of the reduced energy tariffs [intended for use by] the general population. “

Shulginov did not specify whether miners would be placed on an equal footing with industrial or commercial consumers – but the ministry’s plans could be hampered by the fact that Russian law does not officially recognize crypto or crypto mining in any discernible form.

Regardless, Kobzev seems to feel that the concerns are very real. He wrote, Vedemosti added, that electricity consumption of the population in Irkutsk Oblast will be 159% higher by the end of 2021 than in 2020.

The governor also noted that only 1.4% of households in the entire region are responsible for more than a quarter of all electricity consumption. In the period January-July 2021, the population’s energy consumption rose by 13% and exceeded the 5 billion kWh mark.

According to a recent update of the Cambridge University‘s Judge Business School, the “leading portion” of the global Bitcoin network hashrate, “is now located in the United States, followed by Kazakhstan and Russia”.

The latest data from the university’s Cambridge Bitcoin Electricity Consumption Index, which it claims will be correct “by the end of August 2021,” shows that the hashrate of the Russia-based Bitcoin protocol has now surged to more than 11%, versus almost 7% in April 2021.

China’s own hashrate data is not available, although it is believed that some miners are still operating in the country. However, the number of miners in China is likely to adjust downward in the coming months as regional raids continue.

Russian lawmakers will be careful not to follow in the footsteps of nearby Abkhazia, a de facto state in the South Caucasus that has been ravaged by months of political chaos and an energy crisis, with most illegal crypto miners to blame for the widespread disruption of power grids. Entire villages were plunged into darkness after power surges in electrical equipment and substations failed.
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Learn more:
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– No crypto crackdown in Russia but keep coins off Russian soil, official warnings

– The US becomes the largest Bitcoin mining hub after China’s miner exodus
– Academic Says Bukele’s Bitcoin Mining Test Is “Bad Business”

– Nordic bitcoin miners face a double challenge, but the industry is still “pretty optimistic”
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