Russia is emerging as a leading crypto mining hub, with experts explaining the reasons behind its rise. According to reports, Russia claims to have the second highest crypto mining hash rate, trailing only behind the United States. Several factors contribute to this growing trend.
Nikita Zuborev, Senior Analyst at BestChange, a domestic crypto platform, highlights the advantages of mining in Russia. The country enjoys low electricity rates, especially in areas such as Irkutsk, Krasnoyarsk, Khakassia and Dagestan. Some areas even have surplus energy reserves that can be made available to miners on favorable terms. In addition, the relatively low tax on corporate profits makes Russia an attractive destination for mining companies.
Another factor supporting Russia’s mining prospects is its proximity to China, a global leader in the production of crypto mining equipment. The direct rail connection between the two countries allows for faster and cost-effective delivery of mining hardware.
Despite these gains, the Cambridge Alternative Finance Center’s Bitcoin power consumption index recently projected Russia’s monthly hash rate of less than 5% of the global total. By comparison, the United States accounts for nearly 38%, while Kazakhstan and China account for just over 13% and 21%, respectively.
However, BitRiver, the Russian mining giant, believes the country has around 1GW of crypto mining capacity, more than its neighbors. BitRiver attributes this growth to regulatory changes in Kazakhstan and China’s crackdown on mining in 2021. According to the mining company, no country has more than 0.5GW of mining power.
BitRiver CEO Igor Runets also expressed concern about the US mining industry. Rising electricity prices, declining profitability, and the elimination of tax incentives have reportedly hampered the sector, leading to bankruptcy among overloaded companies.
Russia’s abundant electricity production and low prices, coupled with its cold climate which reduces cooling costs, make it an attractive destination for crypto miners. Experts predict that with transparency and understanding of regulations, more investors will continue to contribute to the industry in Russia.
The country’s energy ministry recently called for accelerated efforts to legalize crypto mining, indicating the government’s recognition of its potential. However, it is important to note that this week, Russian secret services arrested a person on treason charges for allegedly sending crypto to the Ukrainian armed forces, highlighting the complex landscape surrounding cryptocurrencies in the country.
As Russia establishes itself as a crypto mining hotspot, its favorable conditions and potential regulatory developments position it to attract further attention and investment from mining companies worldwide.