Putin Blames Crypto Mining for Energy Deficits, Imposes Regional Bans

Russian President Vladimir Putin has attributed the growing energy deficits in the country to the rapid expansion of cryptocurrency mining, which has led to a gradual ban on the activity across various regions. Putin's remarks came in response to the recent surge in electricity prices, which analysts predict will significantly impact the operations of companies involved in Bitcoin mining within the Russian Federation.

During an event focused on development initiatives, Putin explained that the electricity shortages caused by the rapid growth of crypto mining are the primary reason behind Moscow's decision to impose restrictions on the activity in certain regions. Local officials have been urging the federal government to address the issue, as they are facing insufficient energy supplies needed for various infrastructure and industry projects. Putin highlighted the need for a balanced approach to exploiting Russia’s resources, using crypto mining as an example of the challenges faced.

“We were recently happy we had a surplus of electricity in some regions. But they began actively mining there, and governors started complaining to me they did not have enough electricity to develop their regions. We were forced to make certain decisions in the mining sphere,” Putin stated. The concerns raised by local authorities have resulted in seasonal or permanent restrictions on cryptocurrency mining in many parts of the country. A full ban, until 2031, has been imposed in almost a dozen territories, from Siberia to the North Caucasus and occupied Ukraine, although some regions were recently spared with federal officials warning that tax and energy revenues may take a hit.

Electricity costs in Russia have increased since July 1, with tariffs for power transmission via Russia’s national grid set to rise by 11.5% by the end of 2025 and the rates charged by local distributors jumping by 11.6%. Electricity is a significant expense for mining enterprises, as their hardware consumes substantial amounts of electric energy. The latest generation device can burn about 2.5 MW a month, and industrial-size minting facilities have thousands of these mining machines constantly running. While most mining firms account for the usual annual indexation of energy prices in advance, this year’s increase is outstripping inflation and threatens to reduce the competitiveness of Russia’s mining sector as a whole, according to an expert on blockchain, energy, and digital finance.

The expert remarked that both customers of Russian mining companies and investors, especially foreign investors, are already choosing other, more favorable jurisdictions, such as the United States, where a real mining boom is currently taking place. Russia legalized cryptocurrency mining with a law signed by Vladimir Putin in August 2024. Under the legislation, legal entities and private individuals are allowed to mint digital coins as long as they register with the Federal Tax Service and pay their due taxes. Only about 30% have done so. Low electricity rates and, in some cases, a surplus of generating capacities, turned places like the Siberian Oblast of Irkutsk into mining hotspots over the past few years. Then, the resulting power deficits were met with government prohibitions.

Industry watchers claim, however, that the restrictive measures are mostly hurting legal mining businesses. To address the issue, Russian authorities are considering alternative options such as moving crypto farms to energy-rich regions, in the North, for example, while cracking down on illegal mining activities throughout the country, and more specifically in energy-deficient regions.