A 43,000sq ft former agricultural laboratory in northern Russia has opened its doors to cryptocurrency mining, renaming itself KriptoUnivers (CryptoUniverse).
The data centre, launched earlier this week to local press, showcased hundreds of racks containing 3,000 high-powered rigs for mining Bitcoin (BTC) and its 2011 Charlie Lee-created source code fork, Litecoin (LTC).
It’s home, Kirishi, is a town of just 50,000 people, around 400 miles north of Moscow, near the borders with Finland and Estonia. Sitting on the river Volkov, down the valley from the shores of Lake Lagonda, traditionally it has been a hub for Soviet-era chemical industries and oil refineries, along with other heavily polluting industries.
The change to electricity-hungry crypto mining won’t alter that perception of Kirishi, but it does give the Russian government an entry into a hotly-contested Bitcoin mining field.
In previous years China has been home to the world’s largest facilities. Beijing’s Bitmain, which also manufactures Bitcoin mining rigs to make the billions of complex cryptographic calculations necessary to mine new coins, employs 50 people at the Ordos mine in Inner Mongolia. Of eight buildings on Bitmain’s extensive complex, one is dedicated solely to mining Litecoin.
China’s massive hydroelectric power plants provide much of the electricity needed to run its 25,000 machines 24 hours a day, and for its efforts the communist country has been handed the moniker of the Bitcoin mining capital of the world. This is despite stringent anti-cryptocurrency edicts direct from Beijing, which state that cryptocurrencies are not legal tender, and bought about September 2017’s outright ban on ICOs and bank accounts for cryptocurrency holders, along with formal regulatory measures to discourage Bitcoin mining farms.
Thus, while billions are being made available for blockchain investment in the country, crypto miners are now looking outside of Xi Jinping’s China for a new home.
More recently, China’s stringent line has continued. On July 6th, 2018, China’s central bank, the People’s Bank of China, said it had identified 88 virtual currency trading platforms and 85 ICOs that had “all safely withdrawn from the market”. Since 2017 Bitcoin traded with Chinese yuan has dropped from over 90% of global trading to under 5%. It has recently moved again to limit its citizens access to cryptocurrency.
Russian regulation on cryptocurrency is forthcoming too, says Putin’s government. It has a regulatory sandbox approach – much like the Financial Conduct Authority regulator in the UK – but its central bank has made only tentative pronouncements on the legal status of cryptocurrencies so far.
The lower house of Russia’s legislative branch, the Duma, unanimously passed three bills on their first reading in May: ‘On Digital Rights’; ‘On Attracting Investments Using Investment Platforms’; and ‘On Digital Financial Assets’. Each outlines specific terminology for describing smart contracts, cryptocurrency mining and proposes a way to regulate the financial status of all digital currencies.
According to a social media post by Rabicom, the Russian Association of Blockchain and Cryptocurrencies, the head of the State Duma committee on financial markets Anatoly Aksakov is proposing a two or three-year tax break for Bitcoin miners. But the likes of KriptoUnivers may not face the same freedoms as their Chinese counterparts.
Aksakov reportedly said: “If it is a small business, small volumes, then [we will implement] a simplified taxation system. Larger businesses will have to pay the usual taxation and VAT.”
Full adoption of these bills is slated for September 2018. Aksakov told parliament: “We will not be able to cope with it during the spring session. The technology is rather a complicated one. It is rather trans-boundary in its nature and thus we’d rather not spell out norms and regulations that would not work. We hope to adopt them in the second and third reading in September.”