Russian Minister Calls for Regulation on Crypto Mining

Asserting that mining of cryptocurrencies in Russia accounts for more than 2% of the total volume of energy consumed in the country, more than the electricity being used for agriculture, Vasily Shpak, Deputy Head of the Ministry of Industry and Trade said the sector needs to be regulated.

“Do you know how much mining accounts for in the overall map of electricity generation in our country? And I'll tell you: more than 2%. This is more than the cost of electricity for agriculture. We cannot but recognize mining in this sense as an industrial activity or industry,” he said during a speech at the United Russia discussion platform on the development of blockchain technologies and the regulation of digital financial assets.

Russia among top three countries with mining capacity

According to a study by the Cambridge Center for Alternative Finance, which was published in October last year, Russia ranks third after the United States and Kazakhstan in terms of mining capacity for bitcoin, the main cryptocurrency. The data was updated after the start of a campaign to ban cryptocurrency mining in China.

According to the study, the US accounts for 35.4% of the hash rate, Kazakhstan - for 18.1%, and Russia - for 11%. Outside the top three, the next largest hash rates are Canada (9.55%), Ireland (4.68%), Malaysia (4.59%), Germany (4.48%), Iran (3.11%), and Norway (0.58%).

Shpak said crypto mining falls under the "gray zone" where it is not taxed and creates risks for those engaged in it. “Although it is quite possible to whitewash this activity, regulate it, make it understandable and transparent for the state,” he said.

Shpak said lesser amounts of energy will be spent on mining in the future as the world tilts toward protocols that are less expensive than which Bitcoin is currently mined.

“Nevertheless, it is obvious that this is - calculations, one way or another they will consume energy, this is a technological activity. Here our position is completely unambiguous: mining must be recognized, regulated, and built into industrial activity," he said.

Cryptos cannot be used as means of payment: Russian Prime Minister

Last month, Russian Prime Minister Mikhail Mishustin said that the government was in solidarity with the position of the Central Bank that cryptocurrencies cannot be used as a means of payment on the territory of the Russian Federation, while the development of cryptocurrency mining can be discussed. "We also think that to stimulate investment, primarily in fixed assets, we can discuss mining issues, this is the creation of data centers and the corresponding infrastructure," Mishustin had said.

The discussion about the need to legalize cryptocurrency mining in the Russian Federation and make it legal arose after the publication of a report by the Central Bank, which proposed to ban it altogether.