Putin blames the gradual ban on crypto mining in Russia on energy shortages, with rising electricity prices exacerbating the miners' difficulties.

Russian President Putin has recently attributed the nationwide gradual ban on crypto mining to the booming development of digital currency minting, which has led to an increasingly severe energy shortage. Putin's comments on this matter were made after a recent increase in electricity prices, which, as analysts predicted, could affect the business of Bitcoin mining companies in the Russian Federation. This ban not only reflects the pressure Russia faces in energy supply but also impacts the landscape of the global crypto mining industry.

Putin on Russia's Mining Ban: Energy Shortage is the Main Reason

During an event discussing development initiatives, Putin explained that the power shortages caused by the rapid growth of crypto mining are the main reason Moscow has decided to ban the activity in certain areas. The Kremlin quoted Putin's remarks, stating that local officials dealing with this issue have been urging the federal government to take action, as they face insufficient energy supplies for various infrastructure and industrial projects.

At the plenary session of the "Strong Ideas for a New Era" forum organized by the Strategic Initiative Agency, Putin talked about the need to balance the use of Russian resources, using crypto mining as an example: "Recently, we were pleased that some regions have surplus electricity. But then they began to actively mine in these areas, and the governors started complaining to me that they did not have enough electricity to develop their regions. We were forced to make certain decisions in the mining sector."

The concerns of local authorities emphasized by Russian leaders have so far led to seasonal or permanent restrictions on crypto mining in many parts of the country. From Siberia to the North Caucasus and occupied Ukraine, nearly a dozen regions have implemented a comprehensive ban effective until 2031, although some areas have recently been exempted. Federal officials have warned that tax and energy revenues could be adversely affected.

Rising electricity prices harm Russian miners, affecting competitiveness

At the same time, electricity prices in Russia will rise starting from July 1. According to the business news portal RBC, by the end of 2025, the transmission electricity prices of the Russian national grid will increase by 11.5%, and the prices of local distribution companies will rise by 11.6%. Electricity can be said to be the largest expense for mining companies, as their hardware consumes a substantial amount of power. The latest generation of equipment consumes about 2.5 megawatts per month, while industrial-scale mining facilities typically require thousands of such mining machines to operate continuously.

Oleg Ogienko, an expert in blockchain, energy, and digital finance, stated that while most mining companies usually take into account the typical annual energy price indexing in advance, this year's increase has surpassed the inflation rate and could potentially reduce the competitiveness of the entire Russian mining sector. Analysts pointed out that clients and investors of Russian mining companies, especially foreign investors, have already chosen other more favorable jurisdictions, such as the United States. In his words, the United States is currently experiencing a real mining boom.

The Dilemma of Legal and Illegal Mining

In August 2024, Putin signed a law that legalized crypto mining. According to the bill, legal entities and individuals can mint digital currency as long as they register with the Federal Tax Service and pay the applicable taxes. Currently, only about 30% of Russians have done this.

In recent years, low electricity prices and, in some cases, an oversupply of power generation have made places like Irkutsk Oblast in Siberia hotspots for Mining. However, the resulting power shortages have faced government bans. Industry observers claim that these restrictions primarily harm legitimate Mining enterprises. To address this issue, Russian authorities are considering other options, such as relocating Crypto Assets mining sites to northern energy-rich regions while cracking down on illegal mining activities nationwide, especially in energy-scarce areas.

Russia's gradual ban on crypto mining reflects its trade-off between energy supply and economic development. Putin attributes this to energy shortages and emphasizes the pressure from local governments. As electricity prices rise, Russian miners face increased operating costs and declining competitiveness, which may lead to more mining activities relocating to other regions. This policy not only affects the domestic crypto mining industry in Russia but will also have a ripple effect on the global mining landscape.

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