Russia imposes winter ban on crypto mining in key regions to save energy

In an effort to deal with electricity shortages, Russian officials revealed plans to suspend cryptocurrency mining in several regions this winter. The ban will affect the Irkutsk region, parts of Buryatia, the Zabaikalsky region in Siberia and six areas in the North Caucasus, including Chechnya and Dagestan.

Mining will also be banned in the Russian-controlled Ukrainian regions of Donetsk, Luhansk, Zaporizhzhia and Kherson. The suspension of mining in Siberia will last from December 1 to March 15, 2025, with annual restrictions from November 15 to March 15 until 2031. In the North Caucasus and occupied regions of Ukraine, mining it will be prohibited throughout the year from December 2024 until March. 2031

The measure has been approved by a government commission under the leadership of Deputy Prime Minister Alexander Novak.

This year, Russia has become the second largest cryptocurrency mining center in the world after the United States. The nation currently uses 16 billion kilowatt-hours of electricity each year for mining activities, which represents about 1.5% of its total energy consumption and presents challenges for regions with climates tough

Reforms focused on crypto mining in Russia

The latest move comes less than a month after Russia introduced a legal framework for cryptocurrency mining, requiring individuals and companies involved in the industry to register with the Federal Tax Service. Citizens can exploit up to 6,000 kWh per month without the status of an entrepreneur, but must register as an individual entrepreneur if they exceed the limit.

The government also established regulations for mining-related record keeping, with data shared electronically with relevant state institutions and entities such as the Central Bank and electricity operators.

Meanwhile, the Russian government also revised its crypto tax policy last week where it defined cryptocurrency as property for tax purposes. The new revision states that mining income will be taxed according to its market value when received, but miners can deduct related expenses. Cryptocurrency transactions will also be exempt from VAT.

Crypto adoption is on the rise in Russia

While cryptocurrency mining is legal in Russia, trading in these assets is not. Despite this, adoption in Russia has soared amid the ongoing war and intensified sanctions. As previously reported, Russia experienced significant DeFi growth through large institutional transfers.

Homegrown cryptocurrency services in Russia have also become extremely popular, attracting notable inflows from both domestic and international sources. Chainalysis found that web traffic to centralized exchanges remained stable, but Russian-language exchanges that do not require KYC saw a spike in activity last year, which has since stabilized.

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