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Bitcoin & Crypto Mining Costs Might Increase in Russia As Regions Complain

Tim Alper
Last updated: | 3 min read
View of lake Baikal in the Irkutsk oblast, Russia. Source: Adobe/Andrey Shevchenko

Bitcoin (BTC) and crypto mining is causing power shortages in parts of Russia – and political leaders are wading in with interventions that could seek to limit miners’ output or crank up their energy costs.

Per Vedemosti, Igor Kobzev, the Governor of the Irkutsk Oblast in southeastern Siberia, has written a letter to the Deputy Prime Minister Alexander Novak to “complain about illicit cryptocurrency miners” operating in the area – stating that they are causing spikes in consumption.

Novak served as the Minister of Energy from 2012 until last year, when he was appointed Deputy Prime Minister. However, he still wields 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 famously low, and consistently cold temperatures for much of the year have drawn scores of miners to the Irkutsk Oblast and its surrounds, particularly since China began its mining crackdown earlier this year.

But the ministry, and Novak’s successor Nikolai Shulginov, appears to have accepted Kobev and others’ concerns, and might respond with new price hikes for crypto miners.

RBC reported that Shulginov stated:

“In order to maintain a reliable, high-quality power supply, we believe it is necessary to prevent electricity consumption by miners using energy tariffs [intended] for the [general] population.

The minister added that “Miners must not […] worsen the situation by using the reduced-rate energy tariffs [intended for use by] the general population.”

Shulginov did not state if miners would be placed on the same band as industrial or commercial consumers – but the ministry’s plans could be hampered by the fact that Russian law does not formally recognize crypto or crypto mining in any recognizable form.

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

The Governor also pointed out that just 1.4% of households in the entire region were accounting for over a quarter of total electricity consumption. In the period January-July 2021, energy usage by the public increased by 13% and surpassed the 5bn kWh mark.

According to a recent update from the University of Cambridge’s Judge Business School, the “leading share” of global Bitcoin network hashrate “now sits in the United States, followed by Kazakhstan and Russia.”

The university’s latest Cambridge Bitcoin Electricity Consumption Index data, which it claims is accurate “to the end of August 2021,” shows that Russia-located Bitcoin protocol hashrate has now risen to more than 11%, up from almost 7% in April 2021.

China’s own hashrate data is not available even though some miners are still thought to be operating in the nation. The number of miners in China is likely to adjust downwards in future months, however, as regional crackdowns continue.

Russian lawmakers will be keen to avoid following in the footsteps of nearby Abkhazia, a de facto South Caucasus state that has been blighted by months of political chaos and an energy crisis, with most blaming illegal crypto miners for widespread disruption to power networks. Entire villages have been plunged into darkness after power surges saw electrical equipment and substations fail.
Learn more: 
Putin Says Crypto Is ‘Not Worthless’ and Has ‘the Right to Exist’
No Crypto Crackdown in Russia but Keep Coins off Russian Soil, Official Warns

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