Residents of a small Russian republic in the North Caucasus are persistently minting cryptocurrencies in defiance of strict restrictions on their activities, local media have revealed.
Illegal mining has cost utilities in Russia’s southernmost region more than 1 billion rubles this year alone. This is despite a crackdown that already relies on high-tech surveillance and support from feared federal security agencies.
White Russians haven’t given up on cryptocurrency mining
Reports from southwestern Russia clearly demonstrate how difficult it is to eradicate additional sources of income for citizens who have few options to earn money through legal means.
Despite the strictest possible ban, people in Kabardino-Balkaria Republic (KBR), a small region of less than one million people in Russia’s Caucasus, are still mining with stolen electricity.
Local power distribution companies are constantly looking for mining equipment, often in the strangest places, Vesti Kavkaza newspaper wrote in an article before the weekend.
An employee of the utility announced the latest fact that more than 20 mining rigs are minting digital coins in an abandoned building in one of the villages of the republic. They were placed in insulated boxes to reduce noise and hide them well.
The Rosseti North Caucasus Regional Office estimates that the operators of the recently discovered device stole 764,000 kilowatt-hours of electricity from the state, RIA Novosti news agency cited.
According to calculations published in the press release, this equates to economic losses of more than 5.8 million rubles (more than $75,000), which also includes the following details:
“Cabarkenergo experts have foiled a power mining theft in the village of Stari Çelek in the Urvan district. Two dilapidated non-residential buildings on an abandoned site were illegally connected to the power grid.”
Organizers of such small-scale mining operations often choose former industrial or agricultural sites for underground farms, although they are difficult to find due to the relatively low energy consumption of improvised facilities. Because these locations often still provide access to transformers.
The fate of illegal cryptocurrency miners in Kabardino-Balkaria region will be decided by law enforcement and the judiciary, local media outlets noted in a report.
Police are currently preparing to open a criminal case under the provisions of the Russian Criminal Code, which prosecutes “in particular large-scale fraud and abuse of trust resulting in property damage.” The latter is punishable by up to five years in prison.
Russia strengthens crackdown on illegal mining
Russia will regulate mining in 2024, making it the first cryptocurrency activity to be legalized under the country’s jurisdiction. However, it has been pointed out that the concentration of mining companies in some regions of the country is a cause of increasing energy shortages.
Since the beginning of this year, around a dozen regions in Russia, from Siberia to occupied Ukraine, have seen the minting of digital currencies either temporarily restricted during peak electricity consumption periods or permanently banned for years to come.
The most severe restrictions apply to nearly 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 damage to the local power grid and utilities in 2025, according to information published by Telegram channel Mash in late November.
Current Russian law allows both companies and individual entrepreneurs to participate in mining operations as long as they register with the tax authorities, but the vast majority have not yet done so. Recently proposed amnesties are aimed at bringing more people out of the shadow economy.
Mining has recently been identified as a growth area for Russia’s exports and is large enough to add to the country’s balance of payments, but estimates published earlier this week suggest Russia will need to invest $77 billion in new generation production capacity to meet its needs and its AI data centers.
Meanwhile, Russian authorities have begun using increasingly sophisticated means to identify illegal cryptocurrency farms, including technology that tracks energy consumption and internet traffic, and drones equipped with thermal vision cameras.
Federal Security Service (FSB) personnel now frequently take part in joint raids to dismantle these operations. In one of them, last week they destroyed a large mining facility in Chelyabinsk that was allegedly owned by the son of a prominent politician.
