Authorities in Russia Start Identifying Crypto Miners in Residential Areas
Deputy Minister of Energy Pavel Snikkars told journalists that Russian authorities have started identifying illegal cryptocurrency miners operating in residential buildings. According to him, energy specialists in Irkutsk are searching for individuals mining cryptocurrency by monitoring the load on substations. Interestingly, calling mining “illegal” is technically incorrect at this time, as this activity is not yet regulated or formally recognized by law.
The newspaper Izvestia reports that miners are being detected by increases in energy consumption and changes in load profiles. Although cryptocurrency mining is not yet regulated by law, courts have been able to prove that residents are using electricity for non-household purposes. According to the publication, there have already been at least 10 cases where energy companies have successfully recovered the difference in electricity rates between residential and business use from miners.
Pavel Snikkars explained that when energy companies become suspicious, they send an inspector to the apartment to check the electrical installations. After the inspection, residents are either billed at the business electricity rate or, through the courts, it is proven that they are mining cryptocurrency and using electricity for non-household needs.
Irkutsk: Russia’s “Mining Capital”
Ekaterina Avdeeva, head of the Expert Center for Criminal Law Policy and Enforcement of Judicial Acts at “Business Russia,” explains that this issue became especially acute for Irkutskenergosbyt in 2021, when the region became the “mining capital” of Russia. She notes that there have been many cases of residential infrastructure being used for cryptocurrency mining in the area.
Avdeeva says that suspicions usually arise when a resident consumes more than 30–40% of the total electricity used by an entire apartment building, or when there is a sudden spike in electricity consumption.
Essentially, to recognize entrepreneurial activity, it is enough to establish that electricity consumption significantly exceeds the average monthly norm. Andrey Tugarin, managing partner at GMT Legal, told journalists that if you consume a lot of energy, you are considered a miner. In such cases, the energy company simply changes the tariff unilaterally and recalculates the amount owed. Failure to pay the debt leads to electricity being cut off.
Courts generally side with the energy companies, and so far, there have been no successful challenges by residents. In fact, none of these disputes have reached the Supreme Court of Russia, which could set a precedent before legislation is adopted.
Unregistered Electricity Use and Legal Developments
Additionally, “home” mining is often associated with unregistered electricity use, where connections to the power grid are made without permission. Evgenia Burova, PR director of the Garantex cryptocurrency exchange, notes that most apartments and private homes have a consumption limit of 10 kilowatts, which restricts the number of mining devices to just two or three. The monthly profit from such mining (after electricity costs) is about 30,000–40,000 rubles. For this reason, the most high-profile illegal mining cases are related to electricity theft through unauthorized connections.
It’s worth noting that a draft law on mining was submitted to the State Duma on November 17, 2022. The bill regulates “the procedure for mining digital currencies and their subsequent sale.” Essentially, the draft law proposes to legalize mining, require income declaration, and mandate tax payments.
If the amendments are adopted, starting January 1, 2023, miners will be able to sell mined digital currency in two ways: through foreign systems without complying with currency regulation laws, or through a special platform to be created in Russia under an experimental legal regime. In both cases, transactions must be reported to the Federal Tax Service (FNS).
The Bank of Russia conceptually supports the bill but generally maintains its position against the circulation of digital currency in Russia.