In the first three months of 2023, Russia was the second largest Bitcoin miner after the United States. US-based crypto mining companies are facing increasing pressure from regulators and tax authorities. The Russian government, on the other hand, recently agreed to tax breaks, as well as subsidies, for a major new mining facility in the east of the country.
Russia has risen through the ranks to become the second-largest Bitcoin mining sector in the world after the United States. Will it close the gap with the favorite?
China was once the world’s leading crypto mining hub; however, since the government essentially banned the practice in 2021, shutting down some of the world’s largest facilities, the global landscape of crypto mining has evolved.
On the one hand, new mining centers have emerged, such as Kazakhstan. On the other hand, miners in the United States have increased their capacity to meet demand, helping the country reclaim the top position.
According to BitRiver, a Russian technology company that operates hydropower-powered cryptocurrency mining facilities, Russia’s mining capacity reached 1 gigawatt in January-March 2023, placing it in second place for the first time.
Kommersant BitRiver CEO Igor Runets claimed that Russia’s rise up the rankings comes as the pace of US mining slows down due to rising electricity prices, as well as the abolition of tax incentives.
Runets further stated that “the vast majority of the equipment was purchased by American miners on credit, so many over-leveraged companies are in the process of bankruptcy or have already gone bankrupt.”
US Miners Face Higher Taxes
In general, the tax and regulatory environment in which US crypto miners find themselves has become significantly less friendly recently. From the exemptions that allow qualifying large-scale computing facilities to pay a reduced rate of tax in Montana, for instance, the tide has now turned in favor of additional taxes targeting crypto miners.
The “Greenbook”, published by the Department of the Treasury in March, argues that the growth of digital asset mining has a negative environmental impact, and it can also increase energy prices. The measure makes it clear that the tax is intended to reduce the growth of mining. The document adds that an “excise tax on electricity usage by digital asset miners could reduce mining activity along with its associated environmental impacts and other harms.”
Federal lawmakers are considering raising taxes as a means of reining in the industry. Meanwhile, some states have taken a more direct approach to stop crypto mining. One example is taking place in Buncombe County, North Carolina, where there is a plan to grant a one-year moratorium on all mining activities, with the goal of giving the local government time to rewrite its zoning policies to accommodate crypto mining facilities.
While local, state, and national authorities in the United States move to reign in crypto mining, in Russia recent developments suggest that the country may further close the gap between the two largest Bitcoin miners in the world.
By Audy Castaneda
