Putin warns that cryptocurrency mining is causing power shortages and urges the implementation of a digital ruble (CBDC).

In a recent meeting, Russian President Putin expressed concerns about the impact of cryptocurrency mining on the national power grid, and called for the expansion of Russia's central bank digital currency CBDC, namely the implementation of the digital ruble.

Cryptocurrency Mining Intensifies Power Supply Shortages

Putin emphasized that the uncontrolled power consumption of Bitcoin and other cryptocurrency mining operations is leading to power shortages in regions such as Irkutsk, Buryatia Republic, and the Trans-Baikal Territory. He described the situation as "serious and with serious consequences," potentially causing damage to businesses, residential areas, and social facilities, and may disrupt investments and infrastructure projects.

According to Putin, cryptocurrency mining in Russia consumes 16 billion kilowatt-hours (kWh) of electricity annually, accounting for 1.5% of the country's total electricity consumption. Due to Russia's low electricity prices and the ease of relocating and setting up mining equipment, the usage has been on the rise.

Putin Urges Legislation for Mining

In response to these issues, Putin proposed the need for federal legislation in Russia for mining, including taxes and tariffs, to better regulate the industry.

This has been a recent topic of discussion among Russian legislators, who plan to discuss legislation that allows only approved companies to conduct large-scale cryptocurrency mining operations. The legislation will also empower the government to prohibit mining activities in areas facing energy shortages.

According to a July 17th report by AFP, these legislative proposals aim to address the electricity consumption issues related to cryptocurrency mining while ensuring the industry operates within a regulated framework. Additionally, the Russian newspaper "Kommersant" reported a week ago that the Russian State Duma's Financial Market Committee approved a bill draft decriminalizing cryptocurrency mining while continuing to prohibit the use of cryptocurrency for settlements. Currently, Russian law prohibits cryptocurrency settlements but allows for the circulation of cryptocurrencies.

Expanding the Digital Ruble

During the meeting, Putin also emphasized the need for "more comprehensive implementation" of Russia's Central Bank Digital Currency (CBDC), known as the digital ruble. He shared that the digital ruble pilot project has seen significant success, processing over 27,000 transfers and payments for 7,000 goods and services. The pilot involved 12 banks, 600 individuals, and 22 trade and service enterprises from 11 cities, showcasing the "performance and functionality" of the digital ruble.

The Future Prospects of the Digital Ruble

In a report in June, the Chairman of the Russian State Duma's Financial Market Committee stated that Russia may begin using the digital ruble domestically in the second half of 2025. The Russian Central Bank initiated the digital ruble pilot project in August 2023, signaling a significant step in modernizing the country's financial infrastructure.