Russian Bitcoin Mining

Dmitry Marinichev, one of Russian President Vladimir Putin’s internet advisors, is planning to raise $100 million to finance a mining venture through an initial coin offering (ICO), Bloomberg has reported. 

Over the past few years, China-based Bitmain, arguably the largest and most influential bitcoin mining equipment manufacturer in the world, has invested tens of millions of dollars in development, research and manufacturing of its miners and other mining equipment. Yet, according to Marinchev, with just 10 percent of capital raised through the ICO, Russia will be able to reach 30 percent share in global cryptocurrency mining.

Essentially, Marinchev believes that Russia’s excess power capacity and surplus energy will allow the country to mine bitcoin and other cryptocurrencies at significantly lower costs. According to sources, Russia has 20 gigawatts of excess power capacity. RMC and Marinchev further emphasized during their presentation that electricity costs are substantially lower in Russian than in China, a country already well-known for its cheap electricity. In the short-term, Marinchev noted that Russia will compete with Bitmain and the Chinese bitcoin mining industry by using mining equipment and ASIC chips developed by Bitfury. 

Marinchev’s announcement comes months after a meeting between Ethereum co-founder Vitalik Buterin and President Putin. In June, the Kremlin stated in an official announcement translated by Coindesk:

“ Mr. Buterin described the opportunities for using the technologies he developed in Russia. The President supported the idea of establishing ties with possible Russian partners. We are doing a great deal to create a favorable business climate and above all to provide macroeconomic conditions for sustainable economic growth and a stable social system – so that working in Russia is beneficial and pleasant.”

The legality status of cryptocurrencies in Russia has often been unclear and Russia’s Ministry of Finance has previously proposed measures to prevent the use of digital currencies. More recently, the Russian government and its central bank have stated that they have plans to regulate cryptocurrency industry.

In April, Deputy Finance Minister Alexey Moiseev told Bloomberg in an interview that digital currencies including bitcoin will likely be legalized and regulated by 2018. He noted:

“The state needs to know who at every moment of time stands on both sides of the financial chain. If there’s a transaction, the people who facilitate it should understand from whom they bought and to whom they were selling, just like with bank operations.”

The statement from Moiseev implied that with strict Know Your Customer (KYC) and Anti-Money Laundering (AML) policies and systems in place, the Russian government is willing to legalize bitcoin for businesses, users, traders and the public.

The launch of Marinchev’s mining company could set a precedent for Russia’s cryptocurrency industry and open the door for other companies to begin operating in the region.

Local Bitcoins RussiaAccording to LocalBitcoins, the demand for bitcoin in Russia has been increasing at a rapid rate since 2014. Once legilization is put in place, Russia has the potential to become a major market for cryptocurrencies.