Crypto Miners Defy Ban in Russia’s Caucasus Region, Continue Operating

Crypto miners in Russia's Caucasus region are flipping the script—ignoring government bans and powering up their rigs. It's a classic case of decentralized defiance, where code proves mightier than the decree.

The Underground Hashrate

Forget compliance. Operations continue, cutting through red tape and bypassing restrictions with the same ingenuity that defines the crypto ethos. They're not asking for permission—they're securing the network and, presumably, their own bottom line.

Regulation vs. Innovation: The Eternal Tango

This standoff highlights the core tension governments face worldwide. Attempts to ban or control crypto mining often just push it into the shadows, creating a resilient—and unauthorized—industry. It's a game of whack-a-mole, with ASICs instead of rodents.

The Power Play

Mining requires energy, and these clandestine ops are finding it. Whether tapping into local grids or leveraging off-grid sources, the pursuit of block rewards finds a way. It's a testament to the unstoppable incentive structure baked into proof-of-work.

So, while officials draft another memo, the miners mint another coin. In the grand theatre of finance, it's just another act where hard-coded economics outmaneuvers soft-handed policy—much to the dismay of any central planner trying to balance a budget on control alone.

Russian Caucasians are not giving up on crypto mining

A report from the Russian Southwest is clearly demonstrating how hard it is to eradicate an additional source of income for a population with few options to make a buck the legal way.

Despite the strictest ban possible, people in the Kabardino-Balkarian Republic (KBR), a small region of less than a million inhabitants in the Russian Caucasus, are still mining on stolen electricity.

The local power distribution company is constantly finding mining machines, often in the strangest of places, the Vesti Kavkaza wrote in an article before the weekend.

Employees of the utility have just announced their latest catch – more than 20 mining rigs minting digital coins in abandoned buildings in one of the republic’s villages. They were placed in insulated boxes to suppress the noise and hide them well.

Quoted by the RIA Novosti news agency, the local branch of Rosseti North Caucasus estimated that the operators of the recently discovered devices stole 764,000 kilowatt-hours of electricity from the state.

That translates into over 5.8 million rubles (over $75,000) of financial losses, according to the calculations posted in a press release, which also detailed:

“Specialists from Kabbalkenergo, stopped an electricity mining theft in the village of Stary Cherek in the Urvan District. Two dilapidated, non-residential buildings located on an abandoned site were illegally connected to the grid.”

The organizers of such small-scale mining operations, which are harder to detect due to the relatively low energy consumption of the improvised installations, often pick former industrial or agricultural sites for their underground farms, as in many cases, these still provide access to electricity transformers.

The fate of the rogue cryptocurrency miners in Kabardino-Balkaria will be decided by law enforcement agencies and the judiciary, the regional news outlet noted in its report.

Police are now preparing to open a criminal case under an article of the Russian Criminal Code which prosecutes the “causing of property damage by fraud or abuse of trust on an especially large scale.” The latter is punishable by up to five years of prison.

Russia intensifies crackdown on illegal mining

Russia regulated mining in 2024, making it the first legalized crypto activity in its jurisdiction. However, the high concentration of mining enterprises in some parts of the country has been blamed for growing energy deficits.

Since the beginning of the year, the minting of digital currencies has been temporarily restricted during periods of peak electricity consumption or permanently banned for years to come in about a dozen Russian regions, from Siberia to occupied Ukraine.

The strictest restrictions apply to almost all Russian republics in the North Caucasus, including the BRK, Chechnya and Dagestan. Illegal mining there is believed to have caused 1 billion rubles ($13 million) in damages to local power grids and utilities in 2025, according to information released by the Telegram channel Mash in late November.

Under current Russian law, both companies and individual entrepreneurs are allowed to participate in the mining business, as long as they register with tax authorities, but the majority have yet to do so. A recently proposed amnesty aims to bring more of them out of the shadow economy.

While mining has been recently recognized as a growing Russian export, big enough to be added to the country’s balance of payments, an estimate made public earlier this week suggests Russia will have to invest $77 billion in new generation capacities to satisfy its needs and those of AI data centers.

Meanwhile, Russian authorities have started using increasingly sophisticated means to locate illegal crypto farms, including technology tracking energy consumption and internet traffic as well as drones equipped with thermal vision cameras.

Officers from the Federal Security Service (FSB) are now often participating in joint raids to dismantle such operations. In one of these last week, they busted a large mining facility in Chelyabinsk, reportedly owned by the son of a prominent politician.

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