In a massive setback to the global cryptocurrency market, the Russian authorities seized 500 crypto mining rigs during a raid on the Bitcoin mining hotspot Irkutsk.
The seizing activity is based on the miners’ alleged use of electricity, meant for local citizens, at a nominal rate applicable to household consumption.
The crypto miners allegedly caused a loss of over $2.3 million due to underpayment. The Russian authorities said that the residents of the Uyutnoye dacha community and the Molodezhnoye cottage village in the Irkutsk Region own the majority of the mining rigs seized.
This activity by the Russian government shows the tightening of its policies regarding Bitcoin mining. Earlier, raids were conducted to seize the assets of those miners who stole electricity to power their operations.
However, the current developments show that the Russian government is intolerant of any attempts at misappropriating energy sources meant for ordinary citizens.
Cryptocurrency mining is still illegal in Russia due to the high risks, energy requirements, and possible fraud in the field. This is despite the recent attempts by the authorities to legalize the process of crypto mining and make the process taxable.
Crypto mining, being an energy-intensive industry, is highly demanding in terms of electricity requirements. The Russian authorities are mainly concerned about the possible energy scarcity that crypto mining will cause to other sectors.
This is not the first instance of banning raiding and seizing illegal crypto miners in the Irkutsk region. As per the Russian regulations, power companies have the right to identify and remove the illegal miners.
The concerned parties think that if crypto mining is legalized and steps to regulate the mining efforts are taken, the miners can be charged with business rates for the electricity they use, which will avoid the current loss in terms of electricity prices.
The Importance of the Irkutsk Region in Cryptocurrency Mining
Irkutsk is a city of prime importance in the cryptocurrency mining. The main reason for the popularity of mining activities in this region is the comparatively lower cost of electricity that these regions enjoy.
Moreover, the overall climate of the region is cool. So, the miners do not have to invest heavily in technology to cool the equipment. Due to these reasons, crypto miners are largely attracted to setting up their companies in these regions.
The Irkutsk region of Russia is emerging as the mining capital of the country. Many industrial players are attracted to this region due to the above-mentioned reasons.
However, as per the report by the concerned authorities, most miners based in the city are illegal. They install the equipment in houses, apartments, and other domestic establishments and bill them for ordinary rates.
The abundance of players in the region fails most of the tracking mechanisms. Some miners believe that if their business is granted legal status, the illegitimate energy use can be clamped to an extent.
Russian President About Banning Crypto Miners
Russian President Vladimir Putin, in a recent dialogue, stressed the need to clamp down on the operations of the crypto miners in the Irkutsk region.
He said that crypto mining is causing the consumption of a huge amount of electricity, which is about 1.5% of the total energy usage in Russia. The use of so much energy for a single sector will cause a shortage of electricity in other sectors and for the use of ordinary citizens.
Putin also said that the concerned authorities should put in efforts to regulate the decentralized market so that many uncertainties in the field can be addressed.
The overall regulation of the market will prevent instances such as the illegitimate use of electricity at residential rates, which is seen as illegal.
Also, Read: Is Crypto Mining Legal?
The Bottom Line
Cryptomining, though not yet legalized, has become a major business point in Russia. The sector is adding to the global cryptocurrency market, with a majority of miners concentrating on Bitcoins rather than other altcoins.
Bans and seizure of mining rigs at this scale will eventually disturb the global market. Given that the local electricity needs are exploited, an amount of regulation is also indispensable.
The Russian authorities should make appropriate judgments to counter this problem and solve it amicably.
