Russian President Vladimir Putin has warned of a looming energy problem caused by the rampant growth of bitcoin mining in his country.
Putin emphasized the huge energy consumption of mining activities, saying that these activities account for about 1.5% of Russia’s total electricity consumption. This amounts to no less than 16 billion kilowatt hours per year.
The president is particularly concerned about areas such as Irkutsk, Buryatia and the Zabaikalsky region, where power shortages have been frequent recently.
Although not conventional money, cryptocurrencies are increasingly being used for international payments, Putin said, emphasizing the significant energy consumption involved in digital currency mining.
Russia has become a hub for these operations due to low energy prices and the mobility of mining tools. The president warned that unchecked expansion of mining could take a toll on regional energy systems to the breaking point of capacity.
Social and economic consequences
This energy depletion has implications beyond just running costs. Putin underlined the broader social and economic dangers, pointing out that power shortages can have implications for businesses, housing and public services, and for the overall growth of cities.
The president’s comments echo concerns raised by regional leaders, who have pointed to potential disruptions to new businesses, residential areas and key social services.
“An uncontrolled increase in electricity consumption for cryptocurrency mining could lead to power shortages in some places,” Putin said.
Putin on digital ruble as a lifesaver
Amid the chaos surrounding bitcoin mining, Putin also took the opportunity to promote Russia’s digital ruble, or central bank digital currency (CBDC).
The digital ruble originally started as a test program, but has already enabled 7,000 payments for products and services and more than 27,000 transfers. Putin has pushed for the currency’s use by highlighting these figures as evidence of its “performance and usability.”
Source: Payments Cards & Mobile
The digital ruble is a pillar of Russia’s broader plan to modernize its financial system and become less dependent on Western financial institutions. It is high on the agenda of Russia’s economic blueprint as the country negotiates the impact of Western sanctions on its economy.
In this regard, the Putin government is urging companies to explore the use of cryptocurrencies and other digital assets as a replacement for international transaction solutions.
Juggling opportunities and difficulties
The balance between economic benefits and potential dangers remains tricky as Russia grapples with the dual task of controlling its growing cryptocurrency mining industry and developing its digital currency infrastructure. Putin’s demand for a digital ruble and his request for legislative action demonstrate a greater urgency to meet these needs.
Main image by Getty Images, chart by TradingView