Crypto mining ban in Russia results in $10 million of lost profits for Siberian utility

A temporary ban on cryptocurrency mining has caused financial damages to a Siberian energy distributor for close to $10 million in lost profits while leaving a surplus of generation capacity that remained unutilized.

The restrictions imposed in several Russian regions to reduce strain on power grids during cold winter months have led to an increase in illegal coin minting activities, with some miners opting to go underground, according to representatives of the industry.

Electric utility reports drop in revenue due to mining ban

An administrative ban on crypto mining has allowed an energy distributing company in the Siberian Irkutsk Oblast to save over 300 MW of electric power that would have been otherwise used by mining farms operating in the region.

However, as the head of the utility admitted to the Russian press, the freed-up capacity was never claimed by other consumers during the period when the measure was in place. The end client never felt a change in the quality of electricity supply, acting CEO of the Irkutsk Electric Grid Company (IESK), Ilya Brilliantov, told the business daily Kommersant.

The executive went on to reveal that as a direct result of the seasonal ban on mining, IESK has lost around 800 million rubles (almost $9.6 million) in expected gross revenue from electricity transmission services provided to miners.

Cryptocurrency mining was halted in parts of Irkutsk Oblast, Republic of Buryatia and Zabaykalsky Krai between January 1 and March 15. Russia’s Ministry of Energy credited the ban for a 320 MW decline in consumption in these Far Eastern regions. It insisted the measure helped avoid imposing restrictions on other consumers.

The minting of digital currencies has been recognized as a legal business activity in Russia . To participate in it, entrepreneurs and companies are required to register with the Federal Tax Service. Private individuals are allowed to mine until they reach a maximum monthly power usage of 6,000 kWh.

Ban expected to increase share of illegal mining activities

In December, the government in Moscow partially limited or completely banned mining in some parts of the country. The restrictions applied to a list of cities and districts in the three Siberian regions and will be enforced annually between November 15 and March 15 until 2031. A permanent prohibition has been imposed in a number of territories in the North Caucasus and Russia-controlled areas of Ukraine.

Earlier this month, regulators allowed mining to resume in regions covered by the ban, provided only locally produced energy is used. They emphasized that the restrictive measures should limit breakdowns in the power distribution system during peak consumption and ensure the smooth connection of new users to the network.

Sergey Tsivilyov, Russia’s minister of energy, was quoted by Tass as stating in September that “mining activity is not a priority for us.” Irkutsk Governor Igor Kobzev has in the past vowed to seek a year-round ban on bitcoin mining until 2031 in the energy-deficient corners of the oblast.

Under the current regime of restrictions, Russian authorities have managed to decrease power consumption by up to 370 MW, according to some estimates. Quoting official data from Russia’s power system operator, mining giant Bitriver’s Deputy CEO Oleg Ogienko said that the power consumption of large-scale mining operations in the regions affected by the ban declined by 300 – 350 MW.

Sergey Bezdelov, director of the Russian Industrial Mining Association ( APM ), is skeptical that prohibiting mining activities without taking into account realities in the sector would produce the effect sought by the authorities. On the contrary, he expects the ban to push some miners into the grey economy where they’ll continue to consume power while operating outside the law.

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