Despite international sanctions imposed on Russia following its 2022 invasion of Ukraine, the Bitcoin mining industry in the country is booming. Hardware manufacturers Bitmain and MicroBT are positioning themselves to reap the benefits of the surge in mining activity. According to Ethan Vera, Chief Operating Officer at global mining services firm Luxor Technologies, “More machines are flowing into Russia than anywhere else in the world.”
Russia has always been a powerhouse in terms of Bitcoin hash rate – a measure of computational power being contributed to the blockchain – thanks to the availability of cheap energy and its cold climate. This year’s rising price of Bitcoin (BTC) and the Ordinals project that drove up activity on the Bitcoin blockchain have created good conditions for mining in Russia, explained Sergey Arestov, CEO of miner BitCluster. Additionally, increased regulatory scrutiny and taxation in the U.S. and elsewhere have made Russia even more competitive.
Cheap energy costs, one of the largest contributors to mining profitability, have also incentivized miners in Russia to ramp up their operations. Currently, miners are able to install their machines at other firms’ facilities at a cost of $0.05-$0.055 per kilowatt hour (kWh) of energy all-in, thanks to the abundance of cheap energy. Prices in the U.S. are around $0.08 per kWh.
Although the details of how rig manufacturers operate in the country are murky, industry sources agree that they do have a vivid presence. Bitmain and MicroBT have declined multiple requests for comment on this story. However, Bitmain lists a Moscow office on its website and was present at a Crypto Summit in Moscow in April. MicroBT is already entrenched in the market, whereas Bitmain is trying to find intermediaries so that it can better serve the market.
European and U.S. companies have largely been unphased by the sanctions and continued operating in Russia. BitRiver, a Russian entity and the largest hosting provider in Russia, became the first mining entity to be sanctioned by the U.S. government shortly after the invasion. Despite pressure on banking, sanctions may have in fact boosted the Russian mining industry in two ways, wrote Cryptocurrency Mining Group (CMG) in its report.
Geopolitical tensions haven’t deterred Russian miners, nor their overseas clients. Chinese miners “are happy to take their place,” BitCluster’s Arestov said.