Russia enforces six-year ban on crypto mining in 10 regions: here's why

Cryptocurrency miners in Russia will face restrictions across multiple regions as the government has decided to impose a ban on mining activities in 10 territories.

According to a December 24 report from the state-owned news agency TASS, the Russian Cabinet of Ministers approved the ban, impacting the regions of Dagestan, Ingushetia, Kabardino-Balkaria, Karachay-Cherkessia, North Ossetia, Chechnya, Donetsk and Lugansk People’s Republics, Zaporizhzhia, and Kherson.

Starting January 1, 2025, and effective until March 15, 2031, crypto miners in these regions will be prohibited from conducting cryptocurrency mining operations, participating in mining pools, and engaging in any related activities.

Beyond this, some areas like Irkutsk, Buryatia, and Zabaikalsky will face seasonal restrictions on mining activities when electricity consumption peaks.

Notably, the restrictions will be applicable from January 1 to March 15 initially and will be extended in subsequent years to cover the period from November 15 to March 15.

However, the report noted that the list is not final and could be adjusted as the government sees fit.

Initially, regulators were considering a complete ban across 13 regions including crypto mining hotspots like Irkutsk.

With this move, Russia plans to reduce the strain on regional power grids, address electricity shortages, and tackle the economic imbalance caused by cross-subsidization. 

Cross-subsidization occurs when low electricity tariffs in energy-intensive regions, often benefiting crypto miners, are offset by higher costs paid by consumers and industries in other regions.

This creates an unequal financial burden, with central and industrialized regions effectively subsidizing the discounted electricity consumed by mining operations.

Sergey Kolobanov, Deputy Head of the Central Strategic Research Department of Fuel and Energy Complex Economy, told TASS that the timing of the restrictions aligns with the government's plan to phase out these subsidies.

According to him, once the electricity market is liberalized and sufficient energy capacity is ensured, the ban could potentially be lifted.

Regulating the Russian crypto mining sector

The ban comes as a part of new legislation signed by President Vladimir Putin on November 1 that allows the government to restrict mining activity in certain regions while putting in place protocols for implementing these measures. 

Russia had already initiated crackdowns on unauthorized crypto-mining activities even before the latest regulations came into force.

As previously reported by Invezz, in October, the Ministry of Internal Affairs conducted raids on locals using subsidized electricity to illegally mine cryptocurrency.

Meanwhile, Russia has also started taxing cryptocurrency earned from mining as income in kind. 

The law was signed by Putin on November 29, and mining income is taxed under a progressive scale, with rates of 13% for income up to 2.4 million rubles and 15% for income exceeding this threshold. 

On the other hand, corporate profits from cryptocurrency mining are subject to a higher rate of 25%. However, mining-related expenses qualify for tax deductions.