The US Treasury Department first drew attention to bitcoin miners from Russia before the start of the third month of the war in Ukraine. In the latest round of sanctions, the Treasury Department announced that it is taking action against companies in the Russian cryptocurrency mining industry.
Among the sanctioned companies there is BitRiver, founded in 2017. As the name suggests, its mining farms run on electricity from hydroelectric plants. The mining company has 200 full-time employees in three offices in Russia. The Office of Foreign Assets Control has listed 10 BitRiver subsidiaries in the latest package of sanctions against companies and individuals helping Russia mitigate economic losses.
According to the data of Cambridge University, Russia is the world’s third largest country in terms of bitcoin mining. Russian companies run huge server farms, selling their virtual currency mining capacity internationally. Thus, they help the state to monetize natural resources.
“Russia has a comparative advantage in crypto mining due to energy resources and a cold climate. However, mining companies rely on imported computer equipment and fiat payments, which makes them vulnerable to sanctions,” said Brian Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence.
It is worrying that Russia, like Iran, can direct its significant energy resources to cryptocurrency mining in order to circumvent the economic blockade of Western countries. In particular, it will allow monetizing natural resources that can not be exported due to sanctions.
The United States sees revenue from the cryptocurrency mining industry as a potential threat to the effectiveness of its sanctions. At the same time, the Treasury Department seeks to ensure that no assets become a mechanism by which the Putin regime mitigates the impact of sanctions.