News has spread that Russian cryptocurrency experts have created an efficiency standard for crypto mining in Russia by which this activity could be allowed.
Crypto mining in Russia
Russia’s relationship with cryptocurrencies has always been very complex.
The latest sensational news in this regard comes from a recent statement by the Finance Committee of the President of Congress.
According to reports in some Western media, the goal would be to fully legalize cryptocurrency mining, despite the de facto ban on its use as an alternative currency to the ruble.
Mining consumes a lot of electricity, and although Russia possesses large amounts of fossil hydrocarbons that can be used to produce cheap energy, until now mining had not caught on much in the country.
Data dating back to January this year revealed that in all of Russia, which is the largest state in the world by land area, only 4.7% of the Bitcoin hashrate was allocated there, despite the large amount of low-cost energy resources.
By contrast, for example, 37.8% was allocated in the US, and 21.1% in China. Even in Kazakhstan there was a lot more (13.2%).
The main reason Russians hardly mine Bitcoin probably lies in state hostility to cryptocurrencies. However, such hostility is perhaps diminishing.
The Russian government is in fact drafting a new bill to regulate cryptocurrency payments to foreign countries as a valuable ally in the fight against international trade sanctions.
In such a context, it is not surprising that many Russian state departments want to make Bitcoin mining legal in places where there is an abundance of cheap electricity, since their sale abroad at this point would be made legal.
Moreover, Russia’s own Congressional Chairman’s Finance Committee stated:
“Let them earn money.”
The point is exactly this: if Bitcoin mining would produce significant economic-financial revenue, why not do it?
Bitcoin and crypto mining would increase Russia’s coffers
Russia is certainly not a country known for its concern for climate-environmental issues, so it is probably not very interested in issues related to the emission of CO2 or other substances harmful to the atmosphere.
Given the huge availability of fossil fuels with which to produce cheap electricity, it is hard to understand why they have so far wanted to limit mining.
There are two guesses: either they wanted to avoid having to increase electricity production, or they simply wanted to keep citizens as far away from cryptocurrencies as possible.
In fact, even the new bill for international cryptocurrency payments does not seem to be intended to benefit citizens, but mainly Russian companies that export or import.
This shows a marked change regarding the Russian authorities’ attitude toward cryptocurrencies, evidenced in particular by the support for this particular initiative by the country’s central bank, which has always been very averse to cryptocurrencies.
Russia is an authoritarian state in which politicians prefer not to allow citizens too much freedom, and the fact that they can use currencies not authorized by their central bank has long been considered contrary to the country’s authoritarian policies.
Seeing the need, they decided to try to exploit cryptocurrencies to their advantage by using them as a means of international payment to circumvent sanctions. So they continue to be banned from domestic use by citizens, but companies that export and import goods will probably be allowed to use them.
Another use that appears to be coming, given that it could be useful, is mining with selling abroad in exchange for other currencies. However, it is not clear how they can proceed in this way by circumventing sanctions, although seeing that getting cryptocurrencies “out” of Russia is so easy, they will probably use foreign shell companies to which sanctions do not apply.
The fact that Russian cryptocurrency experts have set up a working group to create a standard for efficient mining reveals that there is more than just a willingness to expand crypto mining in the country, so much so that it may not be long before the 4.7% of Bitcoin hashrate can begin to grow significantly.
However, it will not be easy to be able to purchase large quantities of the machinery needed to mine BTC, since they will have to be purchased abroad. Although, it is worth noting that China is the largest producer of miners in the world, and China is an ally of Russia.
Moreover, Russia can take advantage of another no-small advantage: the cold climate.
Climate and China allies of Russia
Bitcoin mining produces a lot of heat, so much so that mining farms must be cooled in order to avoid damage to the machines. Cooling often comes at a significant cost, especially in hot countries, but in Russia there are areas with temperatures so cold that it could be done simply by ventilation with cold air from outside. Indeed, the heat produced by the miners could even be harnessed in some way to heat rooms using what is in fact a zero-cost waste product of the BTC mining process.
Thus, everything leads one to believe that Russia is really getting ready to get serious about Bitcoin and cryptocurrency mining, with one major doubt relating specifically to electricity production.
Indeed, in order to significantly increase that 4.7% hashrate the country’s electricity production will have to increase significantly, although not necessarily a lot.
The question that needs to be asked is, can Russia at this time significantly increase its electricity production without increasing the cost of electricity?
It is very likely that they can somehow do it, but it is impossible to know by how much they will actually be able to increase it.
They could make a difference precisely only if they are actually able to increase their electricity production in abundance where they decide to locate large mining farms, but without having a significant impact on production costs.
Since it is not at all clear at this time whether they will be able to do this, or not, it is not possible to predict or estimate by how much Bitcoin’s Russian hashrate could realistically increase.
Hashrate and Bitcoin mined around the world
This means that it is not even possible to estimate how much additional revenue they could generate by stepping up crypto mining, although it is at least possible to estimate receipts with hashrate at 4.7%.
Approximately 900 BTC are mined worldwide each day. Of these, 4.7%, or just over 42, should theoretically be mined in Russia.
Right now 42 BTC are worth about $800,000, so the daily proceeds with 4.7% hashrate is not much. That’s about $290 million a year, which for a country the size of Russia is not much at all.
Russia’s total GDP is about $1.4 trillion, so $290 million would correspond to a little more than 0.02%, which is definitely a very marginal value. Moreover, this is an overestimate, since in reality costs should be deducted from that $290 million.
At this point, it seems fair to wonder how far Russia wants to go in trying to significantly increase its revenue using Bitcoin mining, and what results it could realistically achieve.