Recently, Russia became the second-largest Bitcoin miner in the world after the electricity required to mine Bitcoin grew to 1 giga tonne in January-March 2023. Currently, Russia’s mining power output ranks second in the world, trailing only the United States, which generates 3-4 giga tonne.
Resource-abundant, but heavily sanctioned Russia took significant steps last year by turning to Bitcoin to evade sanctions. To add to the country’s love affair with Bitcoin, recent reports suggested that Russia has climbed up the mining ladder as well. Let us explore the factors contributing to Russia’s ascent as a Bitcoin mining supergiant.
Ramping up Crypto Mining Capacity
Recently, Russia became the second-largest Bitcoin miner in the world after the electricity required to mine Bitcoin grew to 1 giga tonne in January-March 2023. Currently, Russia’s mining power output ranks second in the world, trailing only the United States, which generates 3-4 giga tonne.
Meanwhile, Russia’s largest mining operator, BitRiver, indicated that the country was able to increase the power generating capacity following a ban on mining activities in nearby Kazakhstan last year, combined with a shortage of electricity in China.
US, the leading Bitcoin miner in the world, faces heavy tax
Additionally, a slowdown in US mining activities amid rising electricity costs prices and a decrease in tax incentives may have allowed Russia to grab a bigger share of the Bitcoin mining pie.
A 30 percent excise tax on the cost of powering crypto mining operations has been incorporated in US President Joe Biden’s proposed budget for 2023. The proposal requires mining businesses to publish reports detailing how much electricity they consumed as well as the energy sources they used.
Several states have also taken measures to limit mining following its negative impact on the environment. For example, New York became the first state to limit crypto mining along with imposing a two-year moratorium on new mining activities that use electricity derived from fossil fuel plants.
Additionally, Buncombe County in North Carolina is set to introduce a mandate which would prohibit mining activities for a year while Texas, which is said to be the Bitcoin mining capital of the US, is introducing a bill to regulate a miner’s interaction with the electric power grid.
Russian Government supporting crypto mining
In contrast to the US, Russia enjoys one of the lowest electricity prices in the world. According to Alisa Tsukanova, the marketing director of Russian crypto exchange EMCD, the mining capacity of Russia is expected to grow even more moving forward as several areas are becoming profitable in mining activities due to low energy prices. Furthermore, a “favorable climate for mining” allows for lesser expenses on cooling equipment.
The crypto mining industry is also supported by the Russian government. Unlike the United States and Canada, which have moratoriums on various areas of crypto mining, Russia is granting tax breaks to crypto miners.
Reports also state that Russia will also subsidize a new 100 MW mining center in eastern Siberia for $12 million, which is anticipated to open in the first half of 2023 and will be operated by BitRiver.
This mining operation will employ 100 people and have 30,000 mining machines. With support from the government, BitRiver is expected to benefit from a wide range of incentives, including exemption from land or property taxes, reduced income tax rates, and subsidized electricity.
Conclusion
Despite the support of the government and the increased efforts of crypto mining companies, there are still many obstacles ahead that could impede the growth of the sector. The State Duma submitted a bill to regulate mining in November 2022, which has not yet been passed, leaving the sector in a state of uncertainty.
Only time will tell whether Russia is here to stay as a relevant power in the Bitcoin mining field, or if it is simply looking for a new money source to temporarily help its ailing economy.
