Why Has Russia Grown to Be a Bitcoin Mining Supergiant?
Recently, Russia became the second largest Bitcoin miner in the world after the electricity required to mine Bitcoin grew to 1 gigaton in January-March 2023. Currently, Russia’s mining is the second largest in the world, only after the United States, which generates 3-4 giga tons.
Resource-rich but heavily sanctioned Russia took significant steps last year by turning to Bitcoin to avoid sanctions. Adding to the country’s love affair with Bitcoin, recent reports suggested that Russia has also climbed up the mining ladder. Let’s explore the factors contributing to Russia’s rise as a Bitcoin mining super-giant.
Increases crypto mining capacity
Recently, Russia became the second largest Bitcoin miner in the world after the electricity required to mine Bitcoin grew to 1 gigaton in January-March 2023. Currently, Russia’s mining is the second largest in the world, only after the United States, which generates 3-4 giga tons.
Meanwhile, Russia’s largest mining operator, BitRiver, indicated that the country was able to increase power generation capacity following a ban on mining in neighboring Kazakhstan last year, coupled with electricity shortages in China.
The US, the leading Bitcoin miner in the world, faces high taxes
In addition, a decline in US mining activities amid rising electricity prices and a reduction in tax incentives may have allowed Russia to take a larger share of the Bitcoin mining pie.
A 30 percent excise tax on the cost of operating crypto mining is included in US President Joe Biden’s proposed 2023 budget. The proposal requires mining companies to publish reports detailing how much electricity they consumed, as well as the energy sources they used.
Several states have also taken measures to limit mining following its negative impact on the environment. For example, New York became the first state to restrict crypto mining along with imposing a two-year moratorium on new mining activities that use electricity from fossil fuel plants.
In addition, Buncombe County in North Carolina is set to introduce a mandate that will ban mining for a year while Texas, said to be the Bitcoin mining capital of the US, is introducing a bill to regulate a miner’s interaction with the electric power grid.
Russian government supports crypto mining
Unlike the USA, Russia has one of the lowest electricity prices in the world. According to Alisa Tsukanova, Marketing Director of Russian crypto exchange EMCD, the mining capacity of Russia is expected to grow even more going forward as more areas become profitable in mining operations due to low energy prices. Furthermore, a “favorable climate for mining” allows less expenditure on cooling equipment.
The cryptomining industry is also supported by the Russian government. Unlike the US and Canada, which have moratoriums on various areas of cryptomining, Russia provides tax breaks to cryptominers.
Reports also say that Russia will also subsidize a new 100 MW mining center in eastern Siberia for $12 million, which is expected to open in the first half of 2023 and will be operated by BitRiver.
This mining operation will employ 100 people and have 30,000 mining machines. With the support of the government, BitRiver is expected to benefit from a wide range of incentives, including exemption from land or property taxes, reduced income tax rates and subsidized electricity.
Conclusion
Despite support from the government and increased efforts by crypto mining companies, there are still many obstacles ahead that could hinder the growth of the sector. The State Duma presented a bill to regulate mining in November 2022, which has yet to be adopted, leaving the sector in a state of uncertainty.
Only time will tell if Russia is here to stay as a relevant power in the Bitcoin mining field, or if it is simply looking for a new source of money to temporarily help its ailing economy.
