When China clamped down on the cryptocurrency mining industry in May 2021, Russia was a popular destination because of its low-cost electricity and favorable climate. However, bitcoin mining and other Russian industries have been affected by sanctions that were imposed in response to Moscow’s attack on Ukraine.
The U.S. Treasury Department targeted Bitriver, a Switzerland-based mining data-center operator with a significant presence in Russia this spring. In order to avoid Western sanctions, the U.S.-based company Compass Mining attempted to liquidate $30M worth of mining hardware in Siberia.
Russia’s invasion in Ukraine has created uncertainty about the future prospects for the mining industry in the energy-rich area, while the cryptocurrency market’s downturn has made digital currencies less profitable, according to a representative from SBI, Japan’s largest online broker. Hideyuki Katsuchi, the chief financial officer of the company, revealed that it plans to sell its equipment in order to withdraw from Russia.
SBI was one of the first Japanese financial institutions to enter the digital asset market. However, this year’s negative developments led to a loss of 9.7 Billion yen ($72 Million) in pretaxes from its crypto business. The group also recorded a net loss of 2.4 Billion yen (over $15.8 M), which is the first time in a decade.
Katsuchi stated that the Japanese brokerage had suspended mining operations in Siberia after the conflict in Ukraine. However, it has yet to decide when it will withdraw from Siberia. According to the executive, although there is no other cryptocurrency business in Russia, this financial company intends to operate its Moscow-based commercial bank unit, SBI Bank. This follows a July U.S. diplomats asking Tokyo’s authorities to press Japanese crypto miners and exchanges to end ties with Russia.
The International Monetary Fund ( IMF), warned that crypto mining could offer Russia and other sanctioned countries, such as Iran, a way out of the economic and financial restrictions imposed on the United States and its allies. These countries have the ability to use their energy resources for mining and can generate revenue from the extraction and payment of cryptocurrencies.
A recent study shows that electricity consumption in Russia’s crypto-mining sector has increased almost 20 percent in the five years since 2017. Siberia’s Irkutsk has some of the best electricity rates in the country. It is also close to the capital Moscow, where miners can benefit from well-developed infrastructure and energy.