After a two-year ban, the Russian Government has realised that it is better off regulating the crypto mining industry
After two years of implementing a ban on mining cryptocurrencies, the Republic of Abkhazia — a province in the Russian Federation — has decided to lift it once more.
The region’s official cabinet website reveals that the new system will incorporate regulation by the Ministry of Finance as well as a two-month restriction on the importation of mining equipment.
The Ministry of Economics is also planning on developing a system that will monitor the mining of cryptocurrencies, which will include an office that will collect and analyze statistics, and provide licenses.
Chernomorenergo, the state power authority, will be responsible for setting guidelines over the amount of electricity used by these businesses.
Abkhazia was a popular destination for entrepreneurs looking to open cryptocurrency mining businesses. The region is known for its affordable electricity rates; every kilowatt per hour for individuals only costs 0.4 rubles (0.5 cents), while legal entities are charged 0.8 rubles (1 cent).
According to media outlet Jam News, the region was so renowned that it became known as the “mecca for crypto farmers”. However, the government put an end to this in 2018, after the energy used to power all the crypto farms lead to a steady increase of power shortages for homes and stores around the area.
According to the director of Chernomorenergo, Ruslan Kvarichiya, the ban did not have the intended effect. In terms of technicalities, the law banned mining equipment to be hooked up to the electrical grids. However, it did not ban importing the new mining equipment into the territory.
In the end, local energy companies were forced to deal with an unchecked increase in new farms. This shadow economy of crypto mining grew and reached a point wherein the power grid once again threatened to shut down across the area. In order to avoid a total energy collapse, the government decided to repeal the ban on crypto mining.
The Vice Prime Minister and the Minister of Economics gave hints that corruption helped the growth of the shadow market, after making comments that electrical engineers “know better than anyone else” how the market continued to grow under the ban.
Many have urged Russia to provide a clearer regulatory framework for cryptocurrencies. Several contradictions in the current law have made it challenging for the emerging industry to continue growing. For example, while mining is not technically illegal at this point, the miners will not be able to receive their mining rewards in digital currency.