Overview of Illegal Cryptocurrency Mining in Russia
Authorities overseeing power in Russia report that they have innovated new techniques to identify and take action against illegal cryptocurrency mining operations in regions suffering from electricity shortages. Specifically, the North Caucasus division of the national electricity provider Rosseti has made strides in uncovering numerous illicit mining setups, particularly in Dagestan, as highlighted by the local news source RG.
Concerns from Residents
Frustrated residents in the Dagestani villages of Balakhani and Maidanskoye had raised concerns about ongoing power outages, prompting Rosseti and its affiliate Dagenergo to explore potential crypto mining activities in the area. By collaborating with internet and mobile service providers, the energy companies temporarily disabled internet access for local residents to measure the electrical load on the grid. This maneuver revealed that power consumption had dropped significantly by 3.2 megawatts, indicating the operation of approximately 900 crypto mining rigs.
Rosseti noted that this amount of electricity could supply 1,500 homes, while the total number of families residing in both villages is less than 900.
Challenges in Detection
Despite these advancements, Rosseti acknowledged the growing complexity involved in locating unauthorized miners. Many now expertly camouflage their operations, hiding machinery in agricultural facilities or utilizing mobile units in vehicles to evade detection. In a notable instance, engineers discovered a mining operation underground in the Sergokalinsky District.
Regulatory Actions and Legal Proceedings
The enforcement of regulations has intensified, particularly in the Untsukulsky District, where several mining machines have been confiscated, leading to 35 legal actions related to illegal electricity use. Charges have been filed against 30 individuals in four villages within the district for unaccounted electricity consumption.
It is worth noting that crypto mining remains prohibited in Dagestan during the winter season until 2031, though locals report persistent mining activities year-round, driven by the region’s low electricity costs.
The Scale of Illegal Mining Operations
Rosseti North Caucasus claims that Dagestan is at the forefront of illegal crypto mining proliferation within the North Caucasus, with reports indicating that the number of illicit farms and the associated theft of electricity doubled in 2024 compared to the previous year. Over the last three years, it is estimated that unauthorized crypto miners have siphoned off around 400 million rubles (about $5 million) in electricity from Dagestan’s grid.
Vyacheslav Afanasyev from the Southern Unified Energy System highlighted ongoing issues concerning miners who illegally receive electricity at residential rates or not at all, attributing this phenomenon to illegal mining practices.
Future Regulations and Penalties
Looking ahead, government officials are contemplating year-round bans on mining in specific regions, alongside proposals to extend current restrictions to additional areas. While some Russian republics are being encouraged to promote mining if they possess surplus electricity, the city of Irkutsk has already implemented a complete ban until 2031. Additionally, discussions are ongoing about increasing penalties for those who violate crypto mining regulations, as current penalties consist mainly of small fines.
Policymakers argue that introducing more severe sanctions, including potential prison time, could provide a stronger deterrent against illegal mining activities.
