The largest association representing the cryptocurrency mining industry in Russia has expressed its strong opposition towards Moscow’s proposal to raise electricity rates specifically for miners.
Miners are being pressed by the Ministry of Energy to significantly increase their payments, ranging from double to quintuple their current contributions.
In its current state, mining in Russia lacks official recognition as a form of entrepreneurship, therefore, miners are presently subject to identical rates as those applicable to residential households.
Despite being granted the power to increase miners’ hourly tariffs, most power providers are in favour of legalizing the sector and are urging Moscow to do so.
Power companies could be authorized to impose elevated non-subsidized rates on industrial or commercial consumers, thereby granting them the ability to charge higher prices.
According to Comnews, the Industrial Mining Association (APM) believes that such measures will potentially drive miners towards a murky realm of semi-legitimacy.
According to the APM, Russia presently holds the distinguished title of being a worldwide frontrunner in the domain of cryptocurrency mining. However, cautionary words were issued as the ministry indicated that if their proposed strategies are approved, the nation will relinquish this advantageous position.
In Russia, the leader of the largest mining company recently asserted that mining operations in the country are poised to surpass profitability levels in the United States.
Russia’s ministry believes that implementing increased tariffs will serve as a deterrent for excessively ambitious miners who wish to establish their operations in the most isolated areas of the country.
In recent weeks, leading energy officials shared their concerns regarding the emerging issue of energy capacity decline in specific parts of Russia.
Crypto miners are believed to impede the linking of power networks to major infrastructure and socially significant facilities.
In the year 2020, BitRiver miners made a notable declaration regarding the cost of power at one of their data centres, stating that they were paying a mere RUB 1.11 (which currently equates to slightly over $0.01) per kilowatt.
A colossal cryptomining facility, concealed within an anonymous Siberian settlement, was reputedly proclaimed as Russia’s most expansive by the very miners who undertook its operations.
Russia’s Fast-growing Crypto Mining Industry Hits Roadblock?
Sergei Bezdelov, the APM Director, expressed his concern regarding the ministry’s proposition, affirming that it contradicts the laws against monopolies in Russia.
He argued that by raising tariffs for miners, ranging from two to five times their current rates, the profitability of industrial mining would be wiped out.
According to Bezdelov, the consequence of this would be a surge in the population of illicit miners in Russia.
Russian officials have conceded that a plethora of companies from the nation are presently engaged in cross-border transactions using cryptocurrency.
Where Are Russian Crypto Miners Setting up Shop?
According to Bezdelov, the current capacity available to Russian industrial miners stands at 4.2 GW. He noted that an impressive investment of $4.2 billion has been made in equipment and data centres for the mining industry.
In the year 2025, with the implementation of a fair and balanced regulatory framework, the government will have the opportunity to generate a substantial annual tax revenue of $563.5 million from the industry.
According to experts in the field, it is estimated that the leading cryptocurrency mining enterprises in Russia, such as BitRiver and Intelion, generated approximately $130 million in revenue during the year 2022.
Nevertheless, cautionary advice from specialists indicates that a majority of data centres are predominantly situated within the jurisdiction of the Irkutsk Oblast, occupying the southeastern region of Siberia.
For years, the Oblast and its energy suppliers have maintained a tumultuous rapport with cryptocurrency miners.
There was elation in their words regarding the arrival of fresh industry in the vicinity. However, they raised concerns about the need for increased power charges from miners and caution against overwhelming the electricity networks.
Frequently Asked Questions:
What has caused dissatisfaction among Russian crypto miners regarding the recent surge in electricity tariffs in Moscow?
Russian crypto miners are expressing their discontent as the Ministry of Energy in Moscow intends to boost electricity rates for their operations. The proposed increase, ranging from two to five times the existing rates, has caused frustration among these miners.
In what manner is the billing system for electricity presented to Russian miners at present?
Russian miners currently face the predicament of being classified outside the realm of entrepreneurship, resulting in the payment of residential-like rates. However, if the proposition to raise these rates is approved, they would no longer benefit from subsidized industrial or commercial rates and would instead be subjected to higher, non-subsidized charges.
What position does the APM, or the Industrial Mining Association, hold regarding the proposed increase in tariffs?
The proposed plan is met with strong opposition from the APM, as they express concerns about the potential repercussions that may arise. They believe that if the ministry’s plans are put into action, miners could find themselves operating in a liminal state of semi-legality, commonly referred to as the grey zone. Additionally, the APM contends that Russia’s status as a prominent figure in global crypto mining may be at risk of diminishing if these proposed measures are implemented.
Moscow’s rationale for endorsing elevated tariffs for cryptocurrency miners is founded on a key inquiry: what drives this belief?
Moscow authorities argue that implementing elevated tariffs can effectively discourage the occurrence of excessive mining in remote regions while simultaneously resolving the strain on energy capacity. This in turn will impede the connection of crucial facilities to power networks.
What kind of consequences could arise in terms of profitability for industrial mining in Russia due to the tariff increment?
Sergei Bezdelov, the chief of APM, claims that the proposition breaches anti-trust laws and has the potential to make industrial mining not financially viable as tariffs could skyrocket by two to five times. Consequently, this may give rise to a surge in illicit mining endeavours.
According to Director Sergei Bezdelov of APM, what are the present figures for the capacity and investment in the crypto mining sector in Russia?
According to Bezdelov, the existing Russian industrial miners have obtained a massive capacity of 4.2 GW, achieved through an investment of $4.2 billion in equipment and data centres. To maximize government revenue, he recommends implementing fair and impartial regulations that could potentially generate an impressive annual tax income of $563.5 million by the year 2025.
In Russia, which regions house the prominent cryptocurrency mining entities, and how much profit did they accumulate in 2022?
BitRiver and Intelion, amongst the top crypto mining enterprises, have established a significant presence within the Irkutsk Oblast, situated in the far-flung southeastern region of Siberia. It is projected that the industry will amass revenues of approximately $130 million by the year 2022.
What has been the response of electricity suppliers in the Irkutsk Oblast to the existence of cryptocurrency miners?
Power suppliers in the Irkutsk Oblast have conveyed contentment with the prevalent existence of the industry, yet simultaneously voiced apprehension regarding the burdensome load on power grids. Furthermore, they have pleaded for an increase in power fees allotted to miners.
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