Russian Crypto Miners Oppose Government’s Proposed Electricity Tariff Surge

Russia’s Ministry of Energy’s proposal to increase electricity tariffs for crypto miners has sparked criticism from the country’s largest crypto-mining association. The Industrial Mining Association (APM) warns that the move could push miners into a “gray zone” of semi-illegality.

As of now, Russian miners, not officially recognized as a form of entrepreneurship, pay residential rates for electricity. Although power providers can raise hourly tariffs for miners, the APM advocates for legalizing the sector, allowing power companies to charge higher, unsubsidized rates for industrial or commercial usage.

The APM emphasizes that Russia holds a global leadership position in crypto mining but cautions that the proposed tariff increases may jeopardize this advantage. The association believes the ministry’s plans could force industrial mining into unprofitability, leading to an influx of illegal mining operations in the country.

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The Ministry of Energy argues that higher tariffs aim to discourage excessive mining activities in remote regions, preventing the depletion of energy capacity and ensuring the connection of larger infrastructure projects to power networks. This comes amidst concerns about the hindrance caused by crypto miners to essential power connections.

Sergei Bezdelov, Director of APM, argues that Russia’s geopolitical climate, marked by sanctions, necessitates a thriving crypto industry for international payments and the uninterrupted inflow of imports. The APM estimates that the Russian industrial crypto mining market grew by 50% in 2023, securing the second position globally after the United States in Bitcoin mining.

Bezdelov contends that the ministry’s proposal violates anti-monopoly legislation, making industrial mining economically unviable. He predicts that this could lead to an increase in illegal mining activities, posing threats to network stability and public safety.

Russian Miners Investment and Potential Tax Revenue:

Bezdelov highlights that Russian industrial miners currently have access to a total capacity of 4.2 GW, with the industry having invested $4.2 billion in equipment and data centers. He suggests that with balanced regulation, the government could potentially tax the industry around $563.5 million annually from 2025.

The APM Director underscores the dangers of illegal mining, which often relies on illicit power connections, leading to increased fire hazards, decreased reliability of power supply to households, and electricity theft.

While some of the largest crypto mining companies in Russia generated approximately $130 million in revenues in 2022, concerns arise as many data centers are concentrated in southeastern Siberia, leading to an uneasy relationship with power providers over fees and grid overloads.

The tension between the Ministry of Energy’s proposed electricity tariff hikes and the Industrial Mining Association’s push for sector legalization highlights the delicate balance needed to sustain Russia’s position in the global crypto-mining market.