A recently proposed policy change may lead to the disruption of the crypto mining sector as Russian lawmakers weigh in. They’re calling for an end to electricity subsidies for miners; they argue the existing system hurts the nation’s economy.
However, state Duma Energy Committee member Boris Gladkikh addressed a formal letter to the Deputy Prime Minister Tatyana Golikova demanding immediate action against miners who were allegedly taking advantage of discounted energy rates.
“Crypto Mining is Bad for the Economy,” MP Warns
Gladkikh noted the increasing popularity of crypto mining in Russia and expressed concern about its effect on the economy.
Many miners use electricity supplied at discounted prices, which he said has generated “economic losses and adverse social consequences.” In his letter, he put forward amendments to current legislation that would strip miners of these benefits.
Russia’s complex system of electricity subsidies divides users into three types, which are residential users with subsidies, economically justified users, and commercial users.
The biggest industrial miners have to pay much higher rates, but small-scale or even home-based miners fall into subsidized categories, which opens up loopholes so they can be benefited by lower-cost tariffs.
Foreign Miners Take Advantage Of Loopholes
Private miners working at home are mostly unregulated under existing regulations unless their power consumption exceeds 6,000 kWh a month. Such facilitation has allowed numerous small-scale miners to operate while still generally flying under the radar, albeit that often at lower rates.
Gladkikh’s proposal aims to fill these gaps by barring all miners, large and small alike, from access to subsidized electricity. Nevertheless, such policies would be difficult to implement due to the decentralized and hard-to-monitoring nature of mining operations.
The Rapid Rise of Crypto Mining in Russia and What it Means
Mining hardware sales in Russia are hitting record numbers in 2024 as crypto mining soars Affordable energy has long made the country an attractive place for mining operations. But it has also caused some illegal mining, with operators connecting directly to power grids to avoid regulations.
Illegal uses have triggered power shortages in multiple areas, leading to increasing annoyance from utility companies. Even miners who do things right but enjoy subsidized electricity have drawn fire for increasing energy demand during peak times.
The Difficulties of Phasing Out Subsidies
As the government debates Gladkikh’s proposal, it is not clear whether it would be practical. To mitigate this, it could result in substantial upgrades of monitoring systems that would allow the differentiation between legitimate residential users and miners. Moreover, enforcement in rural and remote areas might prove especially problematic.”
The proposal also endangers a burgeoning part of Russia’s tech-savvy populace that is involved in crypto mining, which has turned into an attractive side business for many as the country grapples with wider economic woes.
Energy Policy in a Time of Crisis
This situation comes amid heightened energy anxiety throughout Europe and Asia. High global energy prices, along with sanctions that mitigate Russia’s energy exports, have also put new pressure on the government to focus its electricity on domestic use.
Gladkikh’s appeal for stronger regulation is in keeping with wider ef
forts to ensure energy security and economic stability, but its success depends on balancing these priorities against the burgeoning crypto-mining industry.
A Closer Look Ahead
As the debates evolve, this ban may glean insight for future announcements of restrictions on how countries regulate this intersection of public resources and crypto.
This policy change’s impact will not only affect Russia’s internal mining sector but may also have ramifications for the wider global crypto ecosystem. It is unclear if the government will accept Gladkikh’s recommendations or pursue other options.
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