Russia is considering implementing special energy tariffs on cryptocurrency mining activities amid the widespread migration of miners into the country following China’s recent clampdown on the sector.
On Wednesday, October 13, Russia minister of energy Nikolai Shulginov had a conversation with the TASS local news agency. Shulginov stated that he is examining ways to differentiate energy consumption for cryptocurrency mining.
The minister said that cryptocurrency miners should pay more than households for electricity consumption to maintain the electricity grid’s reliability.
“We can’t let miners capitalize on the situation at the expense of low residential electricity tariffs. To maintain the reliability and quality of power supply, we believe it is necessary to prohibit miners from consuming electricity at residential tariffs,” Shulginov stated.
He mentioned that the ministry of energy is working to come up with solutions though it is unclear if any particular directive or bill is to be implemented soon.
Shulginov made such statements after the governor of Irkutsk province complained that miners operate their mining activities in residential buildings and consume huge amounts of electricity at retail prices.
Earlier this week, Irkutskk governor, Igor Kobzev, wrote an official report informing the vice prime minister of Russia, Alexander Novak, noting that electricity consumption in Irkutsk has risen by 159% since last year. Kobzev blamed illegal mining and miners migrating into the country after China imposed a clampdown on cryptocurrency.
Roman Zabuga, Public Relations Director at BitRiver crypto mining farm in Irkutsk, stated that cryptocurrency mining has increased alongside the rising prices of Bitcoin. He noted that the growth comes from local expanding existing mining operations or beginning new ones.
“These miners are, in fact, using electricity for households, on the price that is subsidized by the regional government, for business purposes,” Zabuga stated and added that the government may introduce special tariffs for cryptocurrency miners in the future.
Meanwhile, Russian President Vladimir Putin has indicated tolerance of crypto assets, which are attracting rising scrutiny from regulators across the globe amid fears that they can be used for criminal and money laundering activities.
However, Bloomberg reported on Thursday, October 14, Putin stated that crypto assets have value and said that he accepts their use for payments.
Cryptocurrency “has the right to exist and can be used as a means of payment,” the Russian President said in a recent interview with CNBC media outlets. He, however, still insisted that it is too early to talk about introducing cryptocurrencies to the trade of oil and other commodities that Russia exports.
Such remarks by President Putin leaves hopes of the future adoption of cryptocurrencies by Russia for international commodity trading. Russia has been looking for alternatives to the US Dollar in international trade ever since sanctions hit the sovereign nation in 2014 after the annexation of Crimea. Putin further accused the US of using its currency as a weapon.
Miners Searching for New Locations
The development by Russia regarding special energy tariffs for crypto miners comes just a few days after Kazakhstan increased the electricity tariff for miners operating in the country.
On October 4, authorities in Kazakhstan took such a decision because of the enormous amounts of electricity consumption used in the cryptocurrency mining processes.
Following the crypto mining ban in China in June, miners have been moving out of the country searching for other favourable locations.
Nations like Russia, Kazakhstan, and the US have witnessed an increase in crypto mining activities.
The US has even replaced China as the world’s largest Bitcoin miner, according to research conducted by the Cambridge Center for Alternative finance.
Kazakhstan attracted many miners and overtook Russia in terms of mining capacity. The country now ranks third in cryptocurrency mining volume globally, while Russia dropped down to fourth.
As a result, the Russian Association of Crypto Industry and Blockchain (RACIB) launched a project in July to attract crypto miners to the country.
Russia has many conditions that make it ideal for cryptocurrency mining. The country is ranked among the top 5 nations by electricity production.
The country has a considerable surplus of energy production capacity, and some regions even reach 50% in surplus. While energy resources such as traditional fuels are also easily accessible across the nation, 40% of Russia’s power comes from eco-friendly energy sources like hydro and nuclear. Therefore, the government offers a green path for miners.