Illegal mining of cryptocurrencies became so popular during the crisis that the Abkhazian government decided to legalize and regulate it in order to prevent the energy crisis.
Abkhazia has revived its reputation as the mining region
The government lifted a two-year ban on cryptocurrency mining. It came into effect when mining farms brought the region to the brink of an energy crisis.
According to the official website of the Cabinet of Ministers, the new system will include regulation by the Ministry of Finance and a two-month restriction on the import of mining equipment. This happened after the strengthening of cryptocurrency regulation in Russia.
During this period, the Ministry of economy plans to develop a system regulating cryptocurrency mining, including a center for collecting and analyzing statistics, and granting licenses.
Similarly, the state energy authority Chernomorenergo will set rules regarding the amount of electricity used by these enterprises.
The Cabinet of Ministers banned mining in 2018 after farmers threatened to use the full power of Abkhazia. According to Jam news, Abkhazia has become a Mecca for crypto mining due to the relatively low price of electricity. The business consumed so much electricity that it threatened to cut off electricity in homes and stores.
The restrictions didn’t do any good
Director of the energy company Ruslan Kvarichia said that the veto had the opposite effect than expected. Formally, the law prohibited the connection of cryptocurrency mining equipment to Chernomorenergo’s networks. However, it did not prohibit the import of equipment into the territory. In the end, local energy companies had to face an uncontrolled increase in the number of new farms.
The Deputy Prime Minister and economy Minister said electrical engineers “know better than anyone else” how crypto mining continues to grow under the ban, clearly indicating corruption.
The shadow economy of Bitcoin mining has grown so much that the power grid went down again in September. To prevent a complete energy collapse, the Ministers decided that it would be better to legalize and regulate the mining of crypto-coins.
The lesser of two evils
While mining is booming in Abkhazia, Russia as a whole is a legal mess when it comes to regulating the crypto space. On January 1, 2020, a law prohibiting inconsistent use of cryptocurrency will come into force.
For example, while mining is not technically illegal, miners will not be able to receive rewards for mining in digital currency. Although crypto assets will be legal and regulated, using them as payment will be prohibited in the country.
Despite some nuances (for example, inheritance of crypto assets), the new law of Russian lawmakers will be a headache for miners and traders. Legalizing the mining of crypto assets in Abkhazia comes at an inopportune moment, but given the threat of a power outage, it may be the lesser of two evils.