Russia is considering introducing special energy tariffs for cryptocurrency mining activities amid widespread migration of miners to the country following China’s recent crackdown on the sector.
On Wednesday October 13, Russia’s Energy Minister Nikolai Shulginov had a conversation with the local TASS news agency. Shulginov stated that he is studying ways to differentiate energy consumption for mining cryptocurrencies.
The minister said cryptocurrency miners should pay more for electricity consumption than households to keep the electricity grid reliable.
“We cannot allow the miners to capitalize on the situation at the expense of the low electricity tariffs for private households. In order to maintain the reliability and quality of the electricity supply, we believe it is necessary to ban miners from consuming electricity at household tariffs, ”said Shulginov.
He mentioned that the Department of Energy was working on solutions, although it was unclear whether a particular directive or bill would be implemented soon.
Shulginov made such remarks after the governor of Irkutsk province complained that miners conduct 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 Russian Deputy Prime Minister Alexander Novak that Irkutsk’s electricity consumption has increased 159% since last year. Kobzev blamed illegal mining and the immigration of miners into the country after China cracked down on the cryptocurrency.
Roman Zabuga, public relations director at the crypto mining farm BitRiver in Irkutsk, said that cryptocurrency mining has increased in line with the rise in Bitcoin prices. He found that the growth results from expanding existing mining operations locally or starting new mining operations.
“These miners are actually using household electricity at the regional government subsidized price for business purposes,” Zabuga said, adding that the government could potentially introduce special tariffs for cryptocurrency miners in the future.
Meanwhile, Russian President Vladimir Putin has signaled tolerance of crypto assets that are increasingly being scrutinized by regulators around the world over fears that they could be used for criminal and money laundering activities.
However, Bloomberg reported on Thursday October 14th that Putin stated that crypto assets have value and said he accepts their use for payments.
Cryptocurrency “has the right to exist and can be used as a means of payment,” said the Russian president in a recent interview with CNBC media. However, he still insisted that it was too early to talk about introducing cryptocurrencies to trading in oil and other commodities that Russia exports.
Such statements by President Putin raise hopes for the future introduction of cryptocurrencies by Russia for international commodities trading. Russia has been looking for alternatives to the US dollar in international trade since the sanctions hit the sovereign nation in 2014 following the annexation of Crimea. Putin also accused the US of using its currency as a weapon.
Miners looking for new locations
The development of Russia in terms of special energy tariffs for crypto miners comes just days after Kazakhstan increased the electricity tariff for miners operating in the country.
On October 4th, the authorities in Kazakhstan made such a decision due to the enormous power consumption that is used in the cryptocurrency mining processes.
After China’s crypto mining ban in June, miners moved out of the country in search of other cheap locations.
Nations like Russia, Kazakhstan, and the United States have seen a surge in crypto mining activity.
According to a study by the Cambridge Center for Alternative Finance, the US has even replaced China as the world’s largest Bitcoin miner.
Kazakhstan attracted a lot of miners and overtook Russia in terms of mining capabilities. The country now ranks third in the world in terms of cryptocurrency mining volume, while Russia has fallen to fourth.
As a result, the Russian Association of the Crypto Industry and Blockchain (RACIB) started a project in July to attract crypto miners to the country.
Russia has many conditions that make it ideal for mining cryptocurrencies. The country is one of the top 5 nations in terms of electricity production.
The country has a sizeable surplus of power generation capacity, and some regions even reach a 50% surplus. Even though energy resources such as traditional fuels are readily available across the country, 40% of Russia’s electricity comes from environmentally friendly energy sources such as hydropower and nuclear power. So the government is offering a green path for miners.
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