Will Russia Overtake the USA and Become the Largest Bitcoin Miner?

Russia has recently made significant strides and has become the second largest bitcoin miner in the world, right after the USA.

China was once the leading global center for crypto mining, accounting for between 65 and 75 percent of the total computing power of the bitcoin network. However, since the government effectively banned this practice in 2021, shutting down some of the largest facilities in the world, the global environment for crypto mining has changed.

On one hand, new mining hotspots like Kazakhstan have emerged. On the other hand, miners in the USA have increased their capacities to meet demand, helping the country to take the so-called ‘pole position‘.

However, things are changing rapidly, and the USA may not be able to maintain its lead.

According to BitRiver, a Russian technology company that operates cryptocurrency mining facilities at hydroelectric plants, Russian mining capacity reached one gigawatt from January to March 2023, placing it in second place for the first time. In comments reported by Kommersant, BitRiver’s CEO Igor Runets stated that Russia’s rise comes at a time when the pace of mining in the USA has slowed due to rising electricity prices and the removal of tax incentives.

– Furthermore, the vast majority of equipment has been purchased on credit by American miners, so many companies with excessive financial leverage are in bankruptcy proceedings or have already gone bankrupt – he added.

American miners face higher taxes

Overall, the tax and regulatory environment in which American crypto miners operate has recently become significantly less hospitable.

From exemptions allowing qualified large computing facilities to pay a reduced tax rate in Montana, the trend is changing, and additional taxes targeting crypto miners are being proposed.

For example, in President Biden’s 2023 budget, the Treasury Department proposed a 30 percent excise tax. The tax is levied on the power costs of crypto mining facilities. According to these proposals, mining companies will also have to report how much electricity they use and their energy sources.

The Treasury Department’s ‘Greenbook‘ published in March claims that the growth of digital asset mining has a negative impact on the environment. It can also increase energy prices. This move clearly shows that the aim of the tax is to limit the growth of crypto mining. The document adds that an excise tax on electricity consumption by digital asset miners could reduce mining activity along with associated environmental impacts and other harms.

Federal lawmakers view the tax increase as a means to suppress the sector. Meanwhile, some states have taken a more direct approach to halt crypto mining.

Buncombe County in North Carolina is set to impose a one-year moratorium on all mining activities. This is intended to give local government time to revise its zoning policies to accommodate crypto mining facilities.

In the meantime, the Texas Senate has introduced legislation to regulate how bitcoin miners interact with the state power grid and how their earnings are taxed.

Russian crypto mining receives state support

While local, state, and national authorities in the USA seek to control the crypto mining sector, recent events suggest that Russia could further close the gap between the two largest bitcoin miners in the world.

It has recently been announced that the Russian government will subsidize a new 100-megawatt mining center in Eastern Siberia.

Currently being built by BitRiver, the new crypto farm will not pay land or property taxes and will benefit from a reduced income tax rate. It will also receive subsidized electricity at 50 percent of the price.