Russia’s cryptocurrency mining efforts suffered a setback last week when police shut down two large illegal data centers.
Officers said they took a total of more than 400 cryptocurrency mining rigs offline in raids in Siberia and the Republic of Dagestan.
Cryptocurrency mining in Russia remains in a regulatory “gray zone”
Novosibirsk-based power company AO RES (via Kommersant) reported that police officers searched an abandoned boiler house in a village on the outskirts of Iskitim, Novosibirsk region.
Police discovered an “illegal connection” to the power grid. Officers said they found a “specialized rack several meters high” inside the building.
These racks housed “more than 100 operational ASIC devices,” including devices “designed for cryptocurrency mining.”
Police and power experts also said they found “mining equipment unpacked inside the room.” The power company said:
“Damages caused to the power grid due to the activities of illegal miners amounted to millions of rubles.” [1 ruble = $0.011]”
And AO RES said police officers seized so-called “gray” mining equipment from the scene. However, the cryptocurrency mining activity itself falls under what Russian authorities call “gray” activity.
U.S. Energy Data Administration Tracks Cryptocurrency Mining Power Usage https://t.co/jjR03ggi76 pic.twitter.com/OflreesRE6
— Reuters (@Reuters) January 31, 2024
Mining still does not have legal status in Russia, even though domestic miners claim that Russia’s collective production capacity is now second only to the United States.
For years, major industrial companies like BitRiver have been urging the Russian government to “fast-track” and “legalize” their industry.
But until lawmakers pass a bill recognizing mining as a form of “entrepreneurship,” Russia’s entire cryptocurrency sector will remain in “gray” limbo.
Power company officials said they were considering filing criminal charges against the alleged mastermind of Operation Iskitim.
If found guilty of breach of trust and theft, miners could face up to five years in prison, media claim.
Dagestan Witnesses Increase in Cryptocurrency Mining Activities
In Dagestan, Russian Ministry of Internal Affairs reports that its officials from the North Caucasus Federal District “discovered an illegal mining site on the site of an abandoned brick factory.”
Police raided a “farm” in Dagestan’s Kyzylyurt district following “reports of illegal electricity consumption.”
Experts from the energy network company and “police personnel” inspected the site. They then “identified interference with the substation’s power meter software.” The ministry stated:
“The transformer power was being supplied to a hangar housing more than 300 cryptocurrency mining devices in metal racks.”
The ministry announced that it had disconnected “300 devices” equipped with “video cards for cryptocurrency mining.”
Authorities say they found “components and software used for coin mining” in one room of the complex.
Officers claimed that the ringleaders of the “farm” installed a cryptocurrency mining rig “between July and September 2023.”
Energy company experts said the miners had “circumvented the electricity meters” and connected to local power lines.
A police spokesperson said the miners were responsible for paying a “preliminary amount” of damages worth about $18,700. The ministry said the investigation into the farm is currently “ongoing.”
State power company Dagenergo last month asked operators of Dagestan’s “mining farms” to turn off their rigs for fear of power outages. The provider pleaded:
“We ask you to think of your loved ones. Please turn off mining.” [equipment]. [Mining rigs] It could overload the power grid and cause technical disruption. ”
Russian tycoon Alexei Mordashov wins $500 million claim against Vietnam Oil and Gas Group over unfinished power plant https://t.co/GXyrME1BEc
— Bloomberg Markets (@markets) February 12, 2024
Can Russia become a world leader in crypto mining?
Also in January, Russian miners expressed displeasure over the government’s plans to raise electricity prices.
Energy Department officials want miners to pay higher electricity bills. They believe this will help deter miners from setting up factories in areas where the power grid is already overloaded.
However, industry leaders argue that the move will halt the growth of Russia’s cryptocurrency mining industry at a point when it could become a world leader.