Russia bans cryptocurrency mining in many regions

According to Russian news agency TASS on December 24, the ban will be applied in 10 regions that are lacking electricity, including the southern republics of Dagestan, Ingushetia, Kabardino-Balkaria, Karachay-Cherkessia, North Ossetia and Chechnya, as well as the newly annexed regions of Russia, the self-proclaimed Donetsk and Lugansk republics, as well as the Zaporozhye and Kherson regions.

Temporary bans on cryptocurrency mining will be applied during peak energy consumption periods in three other regions: Irkutsk, Buryatia and Transbaikal.

The list of affected areas could grow longer depending on demand from Russia's electricity sector. The Russian government has said the measures are aimed at balancing electricity use while prioritizing industrial demand.

The move is part of efforts to efficiently manage energy resources and address power shortages while meeting industrial requirements.

Commenting on the proposal last month, Russia’s Deputy Prime Minister in charge of energy, Aleksandr Novak, said cryptocurrency mining could only be useful in regions with surplus electricity supply.

Cryptocurrency mining has the positive effect of being able to balance the electricity load and reduce specific costs, but the negative side is that it “eats up” all available capacity, hindering the connection of new customers to the grid, Novak explained.

The decision comes after Russia legalized cryptocurrency mining. In October, Russia passed a law regulating cryptocurrency mining.

The legal framework also requires individuals mining cryptocurrencies to register with the Federal Tax Service, providing detailed information about their assets.

These regulations introduced concepts such as cryptocurrency mining, mining pools and mining infrastructure operators, and defined the rights and obligations of participants in the cryptocurrency mining market.

Russian President Vladimir Putin raised the issue of regulating cryptocurrencies and digital assets earlier this year, calling it a promising economic sector and calling for facilitating the circulation of digital assets, both domestically and with foreign partners.

In November, the Russian Ministry of Finance presented a draft law to impose taxes on cryptocurrency transactions and cryptocurrency mining by individuals.

Cryptocurrencies will be legally recognized as property, Interfax reported. Income from cryptocurrencies will be taxed at a rate of 15% for individuals earning $24,000 a year from crypto activities. A rate of 13% will apply to those earning less than that. The taxes are expected to take effect next year. Under the proposal, income from cryptocurrencies will be exempt from value-added tax (VAT).

The new draft is part of Russia's efforts to control the cryptocurrency industry.