On the 1,000th day of the war, the Russian Administration imposed an extensive ban on the mining of cryptocurrencies throughout the entire occupied territories of Ukraine. Deputy Prime Minister Alexander Novak initiated this prohibition as a means of addressing the already energy shortages worsened by the ongoing war and seasonal pressures on the electricity supply.
The suggested prohibitory measures shall cover a number of Ukraine regions at present occupied by Russia, including Donetsk, Luhansk, Zaporizhia, and Kherson. The Russian authorities are implementing an integrated policy for the optimization of energy resource expenditures, especially when they are in short supply in autumn and winter. The prohibition is to come into force on 1st December 2024 and remain in operation in the said areas until March 2031.
Crypto Mining Ban Beyond Ukraine
Besides the regions in Ukraine, mining operations will also be limited in some regions of the Russian Federation, such as the North Caucasus and also in the areas of Irkutsk, Buryatia and Zabaykalsk Krai. These restrictions will be in the form of a partial ban in the cases of more severe weather conditions in winter and, in particular, winter months, i.e., from November 15 to March 15 each year until 2031.
This announcement is made against the backdrop of legislation that allows for cryptocurrency mining within the territory of the Russian Federation, which was adopted in July 2024 and put into force exactly 18 days before the new prohibition was announced. The reversal of the trend from legalization to prohibition in the shortest possible time indicates that there is an immediate need for energy management, as Russia also contends with the provision of electric supply in the cold months.
Implications for Crypto Miners and the Industry
The Russian government has rationalized these restrictions due to the so-called “difficult regime balance” prevailing in its electricity industry. The meeting, which Novak attended, also featured deliberations on how to keep energy consumption in check within the context of continuing military hostilities and political confrontations.
This prohibition has considerable ramifications for local miners as well as the larger cryptocurrency industry in Russia. Russia is among the top global contributors to crypto mining. As such, the limitations imposed may result in a sharp decline in mining geographical activities, especially in areas that have been famous for their relatively cheap power. According to the Energy Ministry, the percentage of electricity used for bitcoin mining in Russia is about 1.5%, which translates to roughly 16 billion kilowatt-hours per year.
A Signal for the Global Crypto Market
Furthermore, the prohibition may compel some miners to move their activities to other countries more welcoming than Russia or find other ways to avoid these restrictions. Such a situation is characteristic of the global crypto market that is experiencing great impacts of regulatory regimes as far as operations are concerned.
This issuance of regulation not only impacts miners but also serves as an indication of possible evolutions in the global crypto market as the players grapple with changing regulatory measures. Staying aware of issued measures both at the domestic and international level will be necessary in order to see the long-term effects of these developments on the cryptocurrency mining business, not only in Russia but also in other countries and regions.
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