Increasing regulatory pressures, tax burden and energy costs in countries like the U.S. and Kazakhstan are likely to result in a new great migration of crypto miners, Russian analysts believe. Under such a scenario, Russia has what it takes to occupy up to 18% of the global bitcoin hashrate, they claim.
Russia May Attract Half of Kazakhstan’s Cryptocurrency Miners
The Russian Federation has a chance to increase its leadership in the field of crypto mining, against the backdrop of negative developments for the industry elsewhere. According to specialists from Intelion Data Systems, a major Russian importer and distributor of mining hardware, the country’s share in the Bitcoin hashrate can potentially reach 18%.
As of January 2022, Russia accounted for nearly 4.7% of the global hashrate, according to calculations by the Cambridge Center for Alternative Finance, ranking fifth among major mining destinations. However, the toughening of policies towards the sector in the leading countries can spark another major migration of miners, similar to the one that followed China’s crackdown on the sector in 2021.
New restrictions on access to low-cost energy amid rising electricity rates and the introduction of higher taxes may entail the relocation to Russia of up to 6% of the mining capacities of the United States, Canada, and China as well as about half of the miners from Kazakhstan, the Intelion team projected, quoted by the crypto page of the Russian business news portal RBC.
In this case, Russia’s share in the global Bitcoin hashrate could rise to 18%, which will amount to 3.95 GW of electricity consumption with an average cost of 128 billion rubles (almost $1.7 billion). In April, the leading Russian mining operator, Bitriver, estimated that Russia has already climbed to second place in terms of total power capacity of the facilities engaged in the extraction of digital currencies. Timofey Semyonov, CEO of Intelion Data Systems, commented:
Russia has every opportunity to change the existing hierarchy of the global crypto mining market. The country has everything you need for this: low cost of electricity, reserves of free capacities, developed energy infrastructure in many regions.
Semyonov also highlighted the increased efforts of a number of Russian companies to expand their business as well as government support for the industry. While lawmakers are yet to adopt the long-awaited mining legislation, official statements in Moscow have indicated that Russian authorities intend to utilize what President Putin described as Russia’s “competitive advantages” as a mining hotspot.
To create a favorable investment climate, mining in Russia must become a “legal business activity with clear rules of the game,” the experts from Intelion also said. They think that the crisis in the banking sector in the U.S. and Europe, which is “just beginning,” will be leading to a growing demand for bitcoin as a hedging tool and interest in crypto among traditional financial institutions which should result in increasing global mining volumes.
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