Russian president supports crypto mining against hard line of Bank of Russia

Russia is the world’s third largest miner after the US and Kazakhstan. The Bank of Russia proposed a complete ban on mining and trading cryptos. President Putin, on the other hand, rejects the central bank’s proposal to ban it completely and supports a Russian government proposal to tax and regulate mining of cryptocurrencies instead.

Putin supports a proposal that would allow mining to continue, which makes sense from an energy perspective, as there are many regions in Russia with a surplus of electricity. Unnamed insiders name Irkutsk, Krasnoyarsk and Karelia. Kremlin spokesman Dmitry Peskov declined to elaborate on the president’s stance, saying Putin had instructed the government and the Central Bank to resolve their differences. The Central Bank still opposes mining on environmental grounds. Another reason is that it would create incentives to circumvent regulations, according to its press service.

Good news for the industry

Putin’s position is good news for an industry that has suffered numerous setbacks recently, including China’s complete ban last year and Kazakhstan’s temporary shutdown of miners as the country struggled with power outages. According to Cambridge University data from October 2021, Russia became the world’s third-largest crypto miner in 2021, behind the U.S. and Kazakhstan. The president’s support and public statements mean the proposals are likely to be adopted. Putin called on the government and central bank to reach an agreement soon on how cryptocurrencies should be regulated.

Competitive advantage crypto friendliness

“We also have certain competitive advantages here, especially in so-called mining,” Putin said during a government meeting, but also acknowledged the risks associated with cryptocurrencies. “I mean the surplus of electricity and well-trained personnel available in the country.” Bitcoin mining requires specialized computers that solve complex encryption problems, and the biggest operating cost for that business is electricity. This is helped by the surplus of electricity in a number of Russia’s regions, whose hydroelectric plants are producing surplus or because energy-intensive Soviet-era industrial plants have been decommissioned.

Vitaliy Borschenko, co-founder of Russian miner BitCluster, said miners were invited to join a government working group after the Central Bank published its report proposing a blanket ban on cryptocurrencies. According to him, most ministries and authorities are against radical measures. Good news for the industry in these tough times!

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