Russia has announced a draft resolution to restrict cryptocurrency mining across select regions, citing energy shortages and inequitable electricity pricing. The ban is set to take effect on January 1, 2025, and extend until March 15, 2031, with the aim of rebalancing energy consumption and addressing infrastructure challenges.

Key Details of the Ban

1. Regions Affected:
   • The ban applies to Dagestan, Ingushetia, Chechnya, Kabardino-Balkaria, and North Ossetia.
   • It will also cover certain areas of the Irkutsk Region, Buryatia, and Zabaikalsky Krai, particularly during peak electricity load hours.
   • Territories like Luhansk, Donetsk People’s Republics, Zaporizhia, and Kherson are excluded from these restrictions for now.
2. Implementation Schedule:
   • From 2025 onward, bans will be enforced annually between January 1 and March 15.
   • Starting in subsequent years, restrictions will extend from November 15 to March 15, targeting the winter peak season.
3. Activities Restricted:
   • Prohibition includes mining operations and participation in mining pools.

Why the Ban?

• Energy Shortages:
  • The government cites power grid strains, exacerbated by increased electricity consumption (up 5.8% in industrial regions by mid-2023) and reduced energy production due to export sanctions.
• Subsidized Electricity:
  • Mining hubs like Irkutsk, where electricity costs as low as $0.01 per kWh, have attracted miners, creating imbalances and energy deficits during winter peaks.
• Policy Shift:
  • The ban aligns with the phasing out of interregional cross-subsidization, which previously allowed subsidized energy pricing in regulated regions.

Expert Insights

• Economic Realignment:
  • Sergey Kolobanov of the Center for Strategic Research emphasized that the policy aims to prepare the country for power privatization, eventually eliminating the need for such restrictive measures.
• Future Flexibility:
  • Russia’s Cabinet of Ministers has hinted at revising the restricted zones based on recommendations from electricity commissions, making the ban adaptive to evolving energy demands.

Context: Russia’s Previous Crypto Policies

• In November 2023, Russia imposed a 15% tax on Bitcoin mining profits, reflecting its complex stance on cryptocurrency.
• With the energy shortages and regional pricing disparities, the current ban addresses not just power consumption but also energy equity and market regulation.

As the ban looms, experts see it as a step toward balancing the country’s strained electricity network while laying the groundwork for a more privatized and sustainable energy framework.