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The total capacity of crypto mining facilities in Russia has been increasing in the past year, despite the market downturn and sanctions, according to a survey of leading operators. Depressed prices of mining equipment and stronger interest from domestic customers have been identified as major factors for the trend.
Miners Prepare for Growth as Total Capacity of Crypto Farms in Russia Reaches 500 MW
The capacity of Russian mining farms has exceeded 500 megawatts (MW) at the end 2022, according to results from a poll among established industry players published by the business daily Kommersant. The beginning of 2023 sets them up for continued growth, on the backdrop of a crypto market recovery, but the expansion could potentially be limited by electricity tariffs and taxes for miners, executives said.
Bitriver, the leader in the group, has eight crypto mining sites with a combined rating of 300 MW. The power of the facilities run 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 one at 20 MW.
With abundant energy resources and cool climate, the Russian Federation has certain advantages as a mining destination. However, the ongoing clash with the West over the war in Ukraine has affected the industry, with sanctions hitting Russia’s mining potential in order to limit its ability to use cryptocurrencies to circumvent financial restrictions.
But the penalties and the state of the crypto economy have had different effects on the business of the Russian mining companies. Bitriver, which was specifically targeted by U.S. sanctions, has actually doubled the number of its data centers and available capacity, realizing several large-scale projects in Russian regions, its founder Igor Runets told Kommersant.
Meanwhile, BWCUG has reduced its mining capacity. The company explained new European and North American clients are reluctant to use 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 is yet to be adopted.
Alisa Tsukanova, marketing director at EMCD, remarked that the profitability of mining business may decrease if the government introduces special electricity tariffs and taxes for coin minting enterprises. Speaking to the daily Izvestia, the Chairman of the State Duma Committee on the Financial Market Anatoly Aksakov talked about two options — either imposing a levy like the single tax on imputed income, with a rate in the range of 7.5 – 15%, or taxing profits at 20%.
The survey has been conducted after a study revealed in October last year that bitcoin mining revenue in Russia grew 18 times in four years before declining steeply in the second quarter of 2022. Another piece of research published in August established that the electricity consumption of Russian miners 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.