Russia’s ‘Underground Miners’ Cause Outages in Dagestan Amid Crypto Mining Boom

Key Takeaways

• Russia’s southern district of Dagestan is facing electricity outages owing to illegal crypto mining.
• The Dagestanian prime minister called for stricter penalties for illegal crypto-mining platforms.
• Iran faced a similar issue after legalizing crypto mining in 2019; however, illegal mining forced the government to ban it in 2021. 

Russia’s cryptocurrency mining-related problems had started before the government could finalize new crypto-mining rules.

According to a Reuters report , the southern district of Dagestan is currently facing electricity outages due to illegal crypto-mining operations.

Dagestan Calls for Stricter Crypto Mining Regulation

Dagestan’s local prime minister, Abdulmuslim Abdulmuslimov, called for stricter regulations on crypto mining. 

The demand came amid the recent surge in underground mining operations in the region. The heightened illegal Bitcoin mining operations are primarily underground to evade law enforcement agencies.

Abdulmuslimov, in a statement, said that the operators behind illegal cryptocurrency mining installations are “coming up with new methods of ‘circumventing’ the law – they install mining farms underground.” 

Russia legalized crypto mining and cross-border transactions in August this year amid growing sanctions related to financial issues. While crypto mining was still popular, the legalization only helped the industry boom.

As CCN reported earlier, the demand for mining equipment surged by 300% . While the government is currently mulling a crypto-mining tax, the growing illegal mining operations could force it to implement stricter rules.

Russia Plans to Tax Crypto Mining 

While crypto mining was not illegal in Russia, it was not under the purview of any law, either. The government plans to introduce a new tax regime for the crypto-mining industry and give it legal status.

The Finance Ministry said they plan to introduce the tax guidelines before the end of the current autumn session. Currently, the government is working on two proposals: a short-term tax on electricity consumption and, in the long run, a tax on miner profits.

Russia became one of the top mining destinations after China’s blanket ban on crypto mining. However, with the legalization of the industry now, the government face an uphill task to counter the illegal mining operations and electricty theft.

Russia is not the first country to struggle against illegal mining operations. Iran, another nation that turned to crypto to mitigate its sanction woes, faced a similar situation. 

The country legalized crypto mining in 2019, requiring crypto miners to obtain an operating license. However, within two years, Iran had to ban mining operations due to heavy pressure on the electricity grid from illegal mining operations. The country is now offering a bounty to citizens for informing authorities about illegal mining operations.