Russian miners keep running, may see pivot to Bitcoin in response to sanctions

Published at: Feb. 25, 2022

Russian Bitcoin (BTC) miners are reportedly running as usual despite the government’s invasion of Ukraine this week.

According to estimates from the Cambridge Bitcoin Electricity Consumption index, miners in Russia accounted for around 11.2% of the global BTC hash rate as of August 2021. With sanctions on the Russian government coming from the U.S. and allied NATO nations, it is unclear how the local BTC sector and the broader market will be impacted.

While some crypto mining firms such as Ethereum focused Flexpool have halted their services in Russia in response to the invasion, BTC miners Compass Mining confirmed to customers hosting in Russia that its mining infrastructure will remain operational in the region.

Compass Mining CEO Whit Gibbs expressed his thoughts and prayers to all affected by the conflict, on Twitter earlier today, as he reassured the community that its facilities in Eastern Europe are located safely in Serbia, well outside any “geopolitical unrest.”

I want to reassure our customers hosting in Russia that we are in constant communication with the facilities, which are in Siberia and well isolated from any geopolitical unrest. Compass has confirmed with our partners that all miners are safe and will continue running as normal.

— Whit Gibbs (@BitcoinBroski) February 24, 2022

The Biden administration outlined on Thursday that it would be imposing “sweeping financial sanctions and stringent export controls” on Russia’s top financial institutions, the government, high-ranking officials, and the technology sector.

Notably, it appears that the heavy restrictions won’t yet extend out to the international payments network SWIFT or cryptocurrency transfers. Many onlookers have argued that this could be a time in which the Russian crypto sector flourishes as it could soon become an important tool to sidestep various sanctions.

In a newsletter to investors earlier today, BTC bull and Morgan Creek digital co-founder Anthony Pompliano emphasized that the Russian government could use this moment as a chance to shift away from the US dollar reserve system, and back a decentralized currency with a global appeal:

“This game theory leads us to Bitcoin. The next best option to being the producer and distributor of the global reserve currency is to be the most advanced user and holder of a global reserve currency that no single country controls.”

Related: Twitter users ask Ukrainian armed forces to start accepting crypto donations

“That incentive leads these superpowers to realize that Bitcoin will be essential for decades to come. The countries that have a large ownership stake, along with conducting mining and other pro-bitcoin activities within their country, will have a significant advantage,” he added.

VanEck’s head of digital assets research Matthew Sigel echoed similar sentiments to Bloomberg, noting that the Bitcoin network will enable Russia to reduce the potential harm caused by being shut out of the Western financial system:

“Neither dictators nor human rights activists will encounter any censor on the Bitcoin network.”
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Bitcoin
Regulation
Russia
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Bitcoin Mining
Sanctions
Bank Of Russia
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