Russia becomes second largest BTC miner behind US

Russia has risen through the ranks to become the second largest bitcoin mining sector in the world after the United States. Will it close the gap with the front runner?

China was once the world’s premier cryptomining hub, accounting for between 65% and 75% of the total hash rate of the bitcoin network. But since the government essentially banned the practice in 2021, shutting down some of the world’s largest facilities, the global landscape of cryptomining has evolved.

On the one hand, new mining hotspots such as Kazakhstan have emerged. On the other hand, miners in the US have increased capacity to meet demand, helping the country claim pole position.

However, things are changing quickly and the US may not be able to maintain its lead.

According to BitRiver, a Russian technology firm that operates hydro-powered cryptocurrency mining facilities, Russia’s mining capacity reached 1 gigawatt in January-March 2023, placing it in second place for the first time.

In comments reported by Kommersant, BitRiver CEO Igor Runets said Russia’s rise in the rankings comes as the pace of US mining is slowed by rising electricity prices and the elimination of tax incentives. “In addition, the vast majority of equipment was purchased by American miners on credit, so many over-leveraged companies are about to go bankrupt or have already gone bankrupt,” he added.

US miners face higher taxes

Overall, the tax and regulatory environment in which US crypto miners find themselves has become significantly less hospitable recently.

From exemptions that allow qualified large-scale data processing facilities to pay a reduced tax rate in Montana. For example, the current has now turned in favor of additional taxes targeting crypto miners.

For example, in President Biden’s 2023 budget, the Treasury Department has proposed a 30% excise tax. The tax is imposed on the costs of operating crypto mining facilities. Under the proposals, mining companies will also be required to report how much electricity they use and their energy sources.

The Treasury Department’s “Greenbook” published in March argues that the growth of digital asset mining has a negative environmental impact. It can also increase energy prices. The measure makes it clear that the tax is intended to limit the growth of crypto mining. The document adds that “a special tax on electricity use by digital asset miners could reduce mining activity along with associated environmental impacts and other damages.”

Federal lawmakers see tax increases as a means of curbing the sector. While some states have taken a more direct approach to stopping crypto mining.

Buncombe County in North Carolina is set to impose a one-year moratorium on all mining operations. This is intended to give local governments time to rewrite their zoning regulations to accommodate crypto mining facilities. As it says, there is a risk of negatively affecting local communities.

Meanwhile, the Texas Senate has introduced a bill. The bill would regulate how Bitcoin miners interact with the government power grid, and how their earnings are taxed.

Russia Crypto Mining Receives Government Support

Local, state, and national governments in the United States are moving to reign in crypto mining. Recent developments suggest that Russia may further close the gap between the world’s two largest Bitcoin miners.

It was recently reported that the Russian government will subsidize a new 100 megawatt mining center in eastern Siberia.

The new crypto farm, currently being built by BitRiver, will pay no land or property taxes and benefit from a reduced income tax. It will also receive subsidized electricity at 50% of the prevailing tariff.