Russia's Crypto Dilemma: Battling Crime and Mining While Embracing Sanction Evasion

Russia is grappling with a surge in crypto-related crimes, as acknowledged by the country's Supreme Court. Irina Podnosova, the Chairperson of the Russian Supreme Court, recently stated that digital assets are increasingly being used in criminal activities, either as the means of committing a crime, the criminal income, or the object of the offense. The Supreme Court is reportedly preparing a legislative initiative to recognize crypto as property in criminal cases.

Concurrently, Russia is battling the economic fallout from illegal crypto mining, which is causing significant damage to the country's energy sector. Russian power company Rosseti Group has reported over $14 million in damages to the power grid in 2024 alone, with the most affected regions being the North Caucasus, Novosibirsk, and Volga. The government has implemented seasonal mining bans in several regions and is considering stricter penalties, including criminal charges and fines, to deter offenders and protect critical infrastructure.

Despite its crackdown on illicit crypto activities, Russia's complex relationship with crypto is becoming more evident. While enforcing tougher regulations to combat internal crypto crime, the country is simultaneously embracing crypto to evade Western sanctions. According to a recent report by blockchain analytics platform Chainalysis, Russia's illicit crypto activities continue to thrive as new non-compliant exchanges rapidly emerge to replace those shut down by authorities.