Russian President Putin has condemned the growth of the energy deficit caused by the booming digital currency due to the creeping ban on crypto mining in his country.
Putin’s comments on the issue follow the recent rise in electricity prices, which are likely to affect the businesses of companies mining Bitcoin in the Russian Federation, as analysts have predicted.
The governor asked for it, Putin says about Russia’s mining ban.
Russian President Vladimir Putin explained at an event dedicated to debating development initiatives that the main reasons for Moscow’s decision to ban activities in certain regions.
Local officials addressing this issue are urging the federal government to do something as they face the insufficient energy supply needed for various infrastructure and industry projects.
Speaking about the need to maintain a balanced approach to leverage Russian resources during the plenary session of the “Strong Ideas of New Time” forum, organized by agencies for strategic initiatives, Putin gave imitation mining as an example.
“We were pleased that we had some electricity surplus in some areas recently, but they began to actively mine there, and the governor began to appeal to me that there wasn’t enough electricity to develop their area.
Local government concerns highlighted by Russian leaders have thus far led to seasonal or permanent restrictions on cryptocurrency mining in many corners of a vast country.
Until 2031, the full ban had been imposed on almost 12 territories that occupied the North Caucasus and Ukraine, but some areas were recently spared by federal officials warning that tax and energy revenues could be hit.
High electricity bills can also hurt Russian miners
Meanwhile, electricity costs in Russia have been rising since July 1st. According to a report by the Business News Portal RBC, tariffs on power transmission via Russia’s national grid will increase by 11.5% by the end of 2025, with fees charged by local distributors increasing by 11.6%.
Electricity is undoubtedly the biggest cost for mining companies, as hardware consumes a large amount of electrical energy. The latest generation of devices can burn around 2.5 MW a month, and industrial-sized mint facilities have thousands of these mining machines constantly running.
According to Oleg Ogienko, a blockchain, energy and digital finance expert, most mining companies take into account the usual annual index of energy prices in advance, but this year’s increase is exceeding inflation and threatening to reduce the competitiveness of the overall Russian mining sector.
The analyst said both clients of Russian mining companies and especially foreign investors have already chosen other, more advantageous jurisdictions, such as the US, where the actual mining boom is currently taking place.
Russia legalized cryptocurrency mining in a law signed by Vladimir Putin in August 2024. Under the law, corporations and individuals will create digital coins as long as they register with federal tax services and pay due taxes. Only about 30% do that.
Low power speeds and, in some cases, capacity-generating surplus has transformed places like Irkutsk’s Siberian oblivion into mining hotspots over the past few years. The resulting power disruption was then met with a government ban.
However, industry watchers argue that restrictive measures are primarily hurting legitimate mining operations. To address this issue, Russian authorities are considering alternative options, such as moving crypto farms to energy-rich areas in the north, for example, illegal mining activities across the country, and more specifically, energy-deprived areas.