The team at HASHR8 Inc., a cryptocurrency mining and media firm that aims to support the “decentralized growth” of hashrate (or computing power used to secure digital currency networks) while enhancing the security of blockchains, has published a report titled, The State of Bitcoin Mining in Russia (part of its Bitcoin Mining Index series).

The report notes that according to estimates, Russian Bitcoin miners rank among “the top-three countries in terms of their contribution to the Bitcoin network hashrate.” The report from HASHR8 looks into the dynamics underpinning the Bitcoin mining sector in Russia.

The report reveals that Russia’s Siberian region “houses the dominant share of the country’s mining facilities.” It claims that a “significant energy surplus from advanced hydropower infrastructure in the region enables miners to secure extremely competitive electricity rates.”

The report confirms that a federal law was passed this year that “clearly defines Bitcoin mining as an economic activity,” however, the new regulations will require mining facilities to operate in a particular manner. Cryptocurrency mining hardware that’s intended for “proprietary” mining “must be owned in the name of a foreign entity.”

Pooling and exchanging activities in Russia “must also be carried out with a foreign entity,” the report from HASHR8 confirmed. It also noted that crypto mining hardware “imported directly is subject to a 20% tax but mining facilities can also import indirectly through Kazakhstan and pay a 12% VAT.”

Russia reportedly has a number of large-scale crypto mining facilities that provide different hosting agreements to international institutional clients. Some digital currency mining facilities have a capacity of more than 100 MW. At present, the energy draw of Bitcoin mining in Russia is somewhere around 800 MW to 900 MW, the report revealed.

As mentioned in the report:

“Russia is the fifth-largest producer of hydroelectric power worldwide. The dominant share of Russian [cryptocurrency] mining facilities are based in the Siberian region. It is estimated that hydropower plants in the region generate a surplus of 5 GW of energy. The hydropower infrastructure in this region is far away from the Western Russian cities that house the majority of Russia’s population and energy consumption.”

The report adds:

“This energy surplus allows Bitcoin mining facilities to secure extremely competitive electricity rates in these regions. The benefits of the Siberian region vastly outweigh alternative Russian regions for mining. The vast oversupply of energy allows facilities to secure low costs for the long-term while also having the option to scale at any point. Bratsk, Irkutsk, and Krasnoyarsk are the main mining hubs within the Siberian region.”

As noted in the report, from January 2021 onwards, the Digital Financial Assets Act will require companies to conduct a significant part of their business activity as a foreign entity. The report also mentioned that for proprietary mining, equipment must be “registered in the name of the foreign entity, and all exchange and pooling activities would also need to be carried out through the foreign entity.”

If the cryptocurrency miner or mining facility plans to “solely rent their equipment to overseas clients, the hardware can be owned by a domestic entity.” Local entities will be “subject to a corporate tax of 20%” and entities established in special economic zones “may be able to achieve a tax rate of 0%,” the report noted.

As confirmed in the report, the Cambridge Center for Alternative Finance estimated that Russia’s share of global hashrate (amount of computing power securing cryptocurrency networks) “ranged from 5.46% to 6.9% between September 2019 and April 2020.”

The report further noted that this share was “sufficient to consistently rank the country within the top three countries.” Meanwhile, China “consistently ranked first with estimates placing their hashrate share from 65.02% to 75.62%.”

As stated in the report:

“The estimates indicated that Russia’s share of hashrate was comparable to that within the United States. Recent estimates by industry professionals in Russian mining put Russia’s energy draw from mining at ~800 to 900 MW. Current Cambridge Center of Alternative Finance estimates put the total energy draw of the Bitcoin network at 10.6 GW. If these estimates are accurate, Russia’s current consumption would represent between 7.5% and 8.5% of the Bitcoin network hashrate.”

(Note: to access the full report, check here.)

(Excerpt) Read more Here | 2020-11-30 08:26:45
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