US’ sanctions against Russian virtual currency mining to have global impact
Published: Apr 21, 2022 08:46 PM
bitcoin Photo:IC

bitcoin Photo:IC

The US' new sanctions against Russia's virtual currency mining industry will not only hurt Russian companies, but also impact the global industry chain as well as US companies, according to experts. 

The US Department of the Treasury announced on Wednesday (US time) that it was taking action against companies in Russia's virtual currency mining industry in its latest round of sanctions. One of the targets is a major mining firm founded in Russia called Bitriver.

"By operating vast server farms that sell virtual currency mining capacity internationally, these companies help Russia monetize its natural resources. Russia has a comparative advantage in crypto mining due to energy resources and a cold climate," the US Treasury Department said in a statement on its website.

Mining companies rely on imported computer equipment and fiat payments, making them vulnerable to sanctions, it said.

"The sanctions will do damage to the Russian cryptocurrency mining industry, if the US bans exports of key components for graphics cards or restricts trading via brokers," Wang Peng, an assistant professor at the Gaoling School of Artificial Intelligence at the Renmin University of China, told the Global Times on Thursday.

Miners use the processing power of graphics cards to create bitcoins, and most of the key components are designed by US chip firms and manufactured by their partners in the island of Taiwan or Southeast Asian nations, according to Wang.

However, an industry insider told the Global Times on Thursday that the impact may not be as serious as the US government has reckoned. 

"Miners have the flexibility to transport devices to other destinations like Southeast Asian and certain European countries, though the cost may rise," said the insider, who prefers not to be named. 

According to the Cambridge Bitcoin Electricity Consumption Index, Russia is the world's third-largest country for bitcoin mining. Since China's ban on the virtual currency mining industry in May 2021, Chinese miners have shipped at least 205,000 mining devices to Russia, with BitRiver hosting 200,000 machines from exiled Chinese miners, the Financial Times reported in November.

While the move will hurt Russia's cryptocurrency mining sector, US companies could also bear the brunt of the sanctions, Wang said. 

"If trading and payment of virtual currencies are disrupted, it would affect the value of bitcoins and indirectly affect US companies engaged in the industry and chipmakers that export large quantities of core devices for the mining process," he said.

Global Times