The total capacity of crypto mining facilities in Russia increased last year, despite the market downturn and sanctions, according to a survey of major operators. Depressed mining equipment prices and increased interest from domestic customers have been identified as the main drivers of the trend.
Miners Brace for Growth as Total Crypto Farm Capacity in Russia Hits 500 MW
The capacity of Russian mining farms has surpassed 500 megawatts (MW) by the end of 2022, according to the results of a survey of established industry players published by the Kommersant business daily. The start of 2023 sets them up for continued growth, against the backdrop of a crypto market recovery, but expansion could be constrained by electricity rates and taxes for miners, the executives said.
Bitriver, the leader of the group, has eight crypto mining sites with a combined rating of 300 MW. The power of the facilities managed by Ural Mining Company (UMC) is 88 MW. Bitcluster owns three 60-megawatt farms, EMCD operates 50 MW of data centers in four different locations, while BWCUG has a 20 MW one.
With abundant energy resources and a cool climate, the Russian Federation has certain advantages as a mining destination. However, the ongoing standoff with the West over the war in Ukraine has hit the industry hard, with sanctions hitting Russia’s mining potential to limit its ability to use cryptocurrency to circumvent financial restrictions.
But the sanctions and the state of the crypto economy have had different effects on the business of Russian mining companies. Bitriver, which was specifically targeted by US sanctions, has actually doubled the number of its data centers and available capacity, carrying out several large-scale projects in Russian regions, its founder Igor Runets told Kommersant.
Meanwhile, BWCUG has reduced its mining capacity. The company explained that new European and North American customers are reluctant to use the Russian facilities, despite the lower costs. The operator also highlighted the unclear prospects for crypto mining in terms of legislation. A bill designed to regulate mining in Russia was submitted to parliament in November but has yet to be adopted.
Alisa Tsukanova, marketing director of EMCD, commented that the profitability of the mining business may decrease if the government introduces electricity tariffs and special taxes for minting companies. Speaking to the Izvestia newspaper, the Chairman of the State Duma Committee on the Financial Market, Anatoly Aksakov, spoke about two options: imposing a levy such as the single tax on imputed income, with a rate of 7.5 to 15%, or tax profits at 20%.
The survey came after a study revealed in October last year that revenue from bitcoin mining in Russia grew 18 times in four years before sharply declining in the second quarter of 2022. Other research published in August established that the Russian miners’ electricity consumption had increased 20 times since 2017.
Do you think Russia’s crypto mining industry will continue to grow despite the challenges? Share your expectations in the comments section below.
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