Russia, mining, sanctions: we understand the issue with

  • 20:23 Nov 28, 2022
Russia, mining, sanctions: we understand the issue with

If there is mining in a state, it is closely linked to the economic and production sectors. This pattern can also be seen in the Russian Federation.

How have Western sanctions affected Russia's mining sector and its economy/production potential as a whole? Let's look into it.

Sanctions and Mining

After Russia announced the start of a «special operation» in Ukraine, the European Union and the United States of America went to the trouble of imposing restrictions on various areas of the Russian economy. These sanctions affected industry, many companies, and the mining industry.

We have already talked about the fact that Russia does not yet have a legal framework that would regulate the mining of virtual coins. But mining is widespread in the Russian Federation. Yes, this is not the level of the United States, China or Kazakhstan. Thus, according to the Cambridge Centre for Alternative Finance, the average monthly hash rate in Russia is 4.66%. For comparison, the United States has 37.84%.

When you «put sticks in the wheels» yourself

In any case, there was an active production of virtual coins on the territory of the Russian Federation. Even if not on an industrial scale. And the sanctions policy of Western countries against Russia significantly affected the number of investors who saw an interest in the development of the mining business in Russia. This applies to both Western and Asian investors.

Roman Nekrasov, co-founder of the ENCRY fund, believes that the problems began back in January of this year. According to the specialist, investors were scared off by the ambiguous position of the Central Bank of Russia. It is known that the organization issued a whole report in which it criticized mining. The regulator chose a harsh rhetoric with regard to crypto and actions related to it. You can read more about the reasons for this in our material.

Lawmakers have also spoken out against virtual coin mining. Proposals have been made for criminal penalties for mining.

This fear intensified after the imposition of sanctions against Russia and the uncertainty faced by the Russian economy.

Deputy Prime Minister Dmitry Chernyshenko approved a road map. It proposed to develop mechanisms to regulate mining, not to ban it.

However, even this did not help. Many Russian miners decided to emigrate to other countries. For example, to Kazakhstan. After that, this state was in the top 3 countries by the amount of hash rate, which is spent on mining BTC.

It is fair to say that not all politicians were against mining. In addition to Dmitry Chernyshenko, Russian Finance Minister Anton Siluanov spoke in favor of regulating the mining of virtual coins. He believes that mining should be introduced into the legal field.

On February 18, the department submitted a bill to give the mining of virtual coins a legal status. But again the Central Bank intervened. The regulator presented its bill with some restrictions on mining and crypto in Russia.

Equipment supply disruptions

The issue here is not so much about sanctions, but rather about logistical issues. Asics and other devices for comfortable mining have to be transported to Russia via Asian countries. Which is an expensive «pleasure».

«This is not only due to the current political situation. Problems with equipment began back during the unrest in Kazakhstan», – says Nekrasov.

Other burdens on virtual coin mining

BitCluster co-founder Sergei Arestov noted that the biggest inconveniences are related to making payments. Due to Western sanctions, this process has become difficult to implement. All because of the blocking of international transfers from Russia.

But, according to Sergei Arestov, this can be seen as a plus. Electricity has become cheaper. It is also possible to attract more people engaged in mining from China.

There is a possibility that Russian miners will move to domestic pools due to sanctions restrictions.

However, Binance and EXMO have not blocked Russian accounts and continue to cooperate with them.

How Western sanctions have affected large businesses and companies in the Russian Federation

Restrictions on the Russian Federation have affected more than 80% of the country's companies. This information was obtained thanks to the results of the "Monitoring of the current state of business". This document was provided by the Office of the Presidential Commissioner for the Protection of Entrepreneurs' Rights.

There is also information in the report that about 77% of entrepreneurs have adapted to these realities. About 11.7% left the market or partially stopped their business.

Managers and owners of more than six thousand companies from eighty-five regions of the Russian Federation were counted. Most are feeling the results of the economic downturn.

The result

There is no information that confirms that due to Western sanctions, representatives of unprofitable enterprises began to mine more. The fact is that the restrictions on the Russian economy, which were initiated by the United States of America and the European Union, could not help but affect the state of the Russian financial sector.

Yes, in a sense, it has become easier to mine because of cheaper electricity tariffs. But at the moment, virtual coin mining is not so profitable as to put entire industries on a "mining" track.

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