The United States continues to adopt new sanctions against Russia, in the context of the war in Ukraine. The US Treasury Department said April 20 decided to crack down on Bitcoin miners operating in Russia, including targeting businesses and the sale of hardware. A blow for the sector at the global level, since Russia is the third country hosting the most minors in the world, according to the University of Cambridge.
US targets hardware and businesses
When announcing the latest round of sanctions, the US Treasury Department said it was taking action against ” companies of the Russian mining industry in virtual currency “. This is the first time that the United States has directly targeted Bitcoin miners in Russia in its sanctions.
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Specifically, the penalties will affect payments and materials used, “ mining companies rely on imported hardware and fiat payments, making them vulnerable to sanctions “, is it explained in a press release, without further details.
Among the companies targeted is a giant in the sector, BitRiver, founded in 2017. It has become known in particular for its mining farm in Siberia, which only works with local hydropower, it is also a international mining equipment supplier. In February 2022, it claimed in a statement to be the first Russian company to achieve carbon neutrality. BitRiver employs nearly 200 people in Russia. The Office of Foreign Assets Control (OFAC) has put particular emphasis on 10 Russian subsidiaries of BitRiver in the latest sanctions.
” These US actions should obviously be seen as interference in the crypto mining industry, unfair competition and an attempt to change the global balance of power in favor of US companies. “Reacted in a press release the CEO of BitRiver, Igor Runets.
Russia risks using cryptocurrencies to circumvent sanctions
Why sanction these minors and these companies? US authorities accuse them of allowing Russia to monetize its energy resources under sanctions, “ by operating vast server farms that sell virtual currency mining capacity internationally, these companies are helping Russia monetize its natural resources “. The latter are the country’s main sources of wealth, which makes them a major issue in the current showdown.
In a reportthe IMF warns that countries such as Russia could use Bitcoin to monetize energy resources, “ which cannot be exported due to sanctions “. As a reminder, the American Congress has already voted to ban the import of Russian oil, gas and coal. The European Union for its part, which is much more dependent on fossil fuels from Russia, is dragging its feet in imposing similar sanctions.
As the IMF explains, the monetization of resources via mining is done directly in the blockchain and therefore “ outside the financial system where the sanctions are implemented “. It must also be said that Russia is a country conducive to the exploitation of Bitcoins. Its cold climate makes it possible to reduce the rise in temperature of computers and servers. The country also has significant energy resources, so the probability of experiencing a crisis that would impact cryptocurrency mining, like Kazakhstan, is minimal.
At the start of 2022, Vladimir Putin was in favor of mining, in opposition to the Central Bank of Russia, which wanted the practice to be completely banned. Strangely, the Central Bank seems to have changed its mind. She recently authorized Sberbank to issue digital assets.
Global impacts
These sanctions represent in any case a hard blow for the minors. After having had to leave China, they will now find it difficult to practice in Russia. More and more countries are hostile to the practice, like Sweden in the European Union, because of its very high energy consumption.
Russia accounts for 11.23% of global mining. A potential shutdown in the country of Vladimir Putin would intrinsically lead to a redistribution of the hashrate in the world and therefore a drop in the overall rate. Hashrate refers to the computing power of a server farm to create a block. Enough to severely shake up the global cryptocurrency market.
Finally, these sanctions could push minors to continue their activities in Kazakhstan, a country bordering Russia. However, miners are already facing difficulties there as well as a government that taxes and regulates them more and more. The potential impacts of these sanctions will affect many more countries than just Russia.