Illegal mining erodes $250 million annually, Russia is taking serious action

Russian Energy Committee Chairman Nikolay Shulginov recently disclosed a figure: illegal cryptocurrency mining causes Russia an annual loss of over 20 billion rubles (approximately $250 million). This is not only an economic issue but also directly impacts the energy system—leading to power shortages, grid overloads, and affecting social infrastructure and new residential electricity consumption. In response, Russia is escalating from administrative penalties to criminal sanctions to promote the legalization and compliance of crypto mining.

The True Cost of Illegal Mining

How severe is Russia’s energy pressure? The loss figures provide a clear indication. An annual loss of $250 million sounds significant, but for a country experiencing energy shortages, it’s a substantial burden. More importantly, illegal mining is not just electricity theft; it poses a direct threat to the entire power grid—disorderly connection of high-power-consuming devices causes overloads, ultimately burdening ordinary users.

Shulginov’s statements reflect the Russian government’s seriousness about this issue. It’s not just a tax problem but a matter of national energy security affecting people’s livelihoods.

From Legalization to Crackdown Policy Shift

Russia legalized crypto mining by the end of 2024, requiring operators to register with the Federal Tax Service and pay taxes. This should have been a step toward regulation, but the reality is—less than one-third of operators have completed registration.

What does this low registration rate indicate? Either compliance costs are too high, or fines are not sufficiently deterrent. Russia has clearly recognized this and is beginning to upgrade enforcement measures.

Gradual Policy Escalation

Russia is building a “multi-layered” penalty system:

The goal of this combined approach is clear:

• First, use fines to lower the cost of illegal activities
• Then, escalate to criminal threats to increase penalties
• Finally, leverage regulatory authority to eliminate industry barriers and encourage compliance

Key to Promoting Compliance

The State Duma has passed a bill in the first reading, authorizing the Ministry of Finance to remove administrative barriers and increase industry registration rates. This means Russia aims not only to crack down on illegal mining but also to make legal mining easier.

This is a typical “carrot and stick” strategy: harshly penalize illegal activities while optimizing compliance processes. If these policies are effective, mining operators who are still on the fence may face a window of choice—either proactively comply or face harsher consequences.

Summary

Russia’s crypto mining regulation is shifting from “leniency” to “control” and then to “standardization.” The $250 million annual loss is a tangible figure that underscores the seriousness of the issue. From administrative fines to criminal sanctions, from simple crackdowns to creating a compliant environment, the Russian government is demonstrating its stance through concrete actions: crypto mining can exist, but only within a framework. The key to the future lies in whether the pace of compliance promotion and law enforcement can truly change the current situation.