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.
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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.
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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.
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FAQs
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.
What does Russia have to do with Bitcoin? ›
In response to mounting financial pressures of Western sanctions, Russia enacted significant legislation legalizing cryptocurrency mining and permitting the use of cryptocurrency for international payments.
Is bitcoin mining legal in Russia? ›
According to Chainalysis, Russia's decision to legalize crypto mining is another major aspect of its sanctions evasion strategy. The new laws introduce a structured framework for mining activities, requiring approved entities to register their operations and report them to the financial authorities.
Why does Bitcoin need mining the most? ›
Validating transaction information, maintaining the integrity of the blockchain, and opening new blocks are mining's purposes, while the Bitcoin reward is the incentive to mine. Bitcoin mining is necessary to maintain the ledger of transactions upon which Bitcoin is based.
Did Russia pass a bill to allow international payments with cryptocurrency? ›
The lower house of Russia's parliament on Tuesday approved a law that permits making international payments via cryptocurrencies, local media reported. Russia's central bank is itself looking to move money across borders using crypto before the end of 2024, Governor Elvira Nabiullina said.
Do Russia have a Bitcoin machine? ›
Cities in Russia with a Bitcoin ATM 2024
The country was estimated to have around 74 cryptocurrency withdrawal machines that allows users to connect to a Bitcoin wallet or exchange. An open-source website lists Russia in the top 10 of the world in terms of how many companies accept cryptocurrency payments.
Do Russians buy Bitcoin? ›
Russia, the world's largest country, has emerged as a significant contributor to the success of Bitcoin, particularly in mining, development, and adoption.
Can you mine Bitcoin without buying it? ›
While it's possible to mine Bitcoin without investing any money, it's important to understand that mining Bitcoin requires specialized hardware and significant amounts of computing power and energy.
Who is allowed to mine Bitcoin? ›
Anyone can participate in the Bitcoin mining process, but unless you have access to powerful computers known as ASICs (that's “application-specific integrated circuits”), your chances of winning a Bitcoin reward are pretty low.
Can you actually mine Bitcoin? ›
The majority of the Bitcoin network mining capacity is owned by large mining firms and pools. It is still possible to participate in Bitcoin mining with a regular at-home personal computer if you have one of the latest and fastest graphics processing units.
Once all 21 million bitcoin are mined by the year 2140, no new bitcoin will be created. This means miners will no longer receive block rewards for adding new blocks to the blockchain. Instead, their compensation will come solely from transaction fees paid by users.
How long does it take to mine 1 Bitcoin? ›
The length of time it takes to mine 1 Bitcoin can vary. Each committed Bitcoin block releases 3.125 Bitcoin. To answer the central question in mind, it takes an average of 10 minutes to mine not just 1 Bitcoin but 3 — and that rate will fluctuate over time.
What happens if all Bitcoin miners stop mining? ›
If miners stop mining Bitcoin, the network will eventually grind to a halt. For each block to be produced, there must be a consensus among the miners. That means no new transactions will be confirmed or added to the blockchain—they'll simply remain stuck in the mempool.
What is the name of the Russian cryptocurrency? ›
The Digital Ruble is a central bank digital currency (CBDC) commissioned by Russian President Vladimir Putin.
Does Russia have its own payment system? ›
The Mir card was the key part of Russia's strategy to build its own payment system. The country aimed to operate local payments and clearing operations independently from foreign companies such as MasterCard and Visa. The Mir card came into effect in 2015. Initially it was adopted slowly by Russian banks and consumers.
Is cryptocurrency taxable in Russia? ›
Do you have to pay crypto tax in Russia? Yes, currently you have to pay a 20% Value Added Tax (VAT) on crypto in Russia. Under the new bill proposed in 2022, there is tax levied on the income generated from holding cryptocurrency and they are taxed as “securities”.
How much Bitcoin is held in Russia? ›
On the eve of the expanded invasion, Kremlin estimates placed Russian citizens' cryptocurrency holdings at $214 billion, 12 percent of the global total. This number does not count currencies not listed in public blockchains (Vedomosti, February 1, 2022).
Is Russia crypto-friendly? ›
In the summer of 2024, the Russian State Duma (the lower chamber of the Russian parliament) legalised cryptocurrency and crypto mining. The Kremlin has made no secret of the fact that this is a consequence of the sanctions that have made trade difficult even with friendly countries since the end of 2023.
Which crypto is popular in Russia? ›
Bitcoin – the first and most popular cryptocurrency in the world totals to around half the overall crypto market cap. In 2020, Russia's Bitcoin trading volume on online exchanges was listed second in the world (after the US), with double the trading volume of the whole European Union.
Will Russia ban cryptocurrency? ›
The new law will not lift an existing ban on cryptocurrency payments inside Russia. The central bank said that delays in payments have become a major challenge for the Russian economy, leading to an 8% decline in Russian imports in the second quarter of 2024.
