Abkhazia: ban on crypto-mining ineffective, energy crisis looms

Abkhazia is on the verge of an energy crisis, specialists say, nothing the republic doesn’t have enough electricity to meet the growing demands of the population and the economy. 

The main reason is crypto-mining, which uses vast amounts of energy. The government banned the practice a year and a half ago, but  enforcing the ban has not been easy. 

Now they are thinking about legalising it.

Not enough electricity

The network operations manager of the Abkhaz energy company Chernomorenergo asserts that the total amount of power used by crypto-mining operations in the republic is no less than 40-45 megawatts.

“That much power, used round the clock for a whole year may take up to 400 million kilowatt-hours, which is a large part of the energy deficit predicted for Abkhazia. That deficit could be 704 million kilowatt-hours for the rest of 2020”, says Ruslan Kvarchia, director of technical operations for Chernomorenergo.

• Op-Ed: Difficult times ahead for economy of Abkhazia

What is cryptomining?

 Crypt—mining is the process of acquiring electronic currency like Bitcoin or other cryptocurrencies using special equipment.

This is done through the use of multiple unconnected computers which solve mathematical operations with a special programme.

The most effective way to do this is through large mining operations called “farms”.

Banned, but still done

The government has officially banned crypto-mining in Abkhazia since the end of December 2018. But the government still have not developed a clear system to punish those who break the law. The only thing the law can really do is cut power to an enterprise. However, that has no real effect, since the enterprise will soon connect to the power again, illegally. 

 The majority of crypto-mining enterprises do not pay for their energy, because of the ban. For those who do, the rate for electricity starts at 45 kopeks (0.005 euro) per kilowatt-hour (for a person), up to 85 kopeks (0.0095 euro) per kilowatt-hour (for a legal entity).

The ineffective ban, along with the low rates, has actually led to a rise in crypto-mining in the republic. On top of that, although the government banned crypto-mining itself, they have not banned the import of equipment for it.

As a result, in the first six months of 2020, more than twice as much crypto-mining equipment was legally imported to Abkhazia than in the whole of 2019.

According to a message from the Telegram channel Apelsin, the government of Abkhazia is planning to legalise crypto-mining in the near future. Cryptominers will be charged special rates for electricity, which will be significantly higher than those which legal entities currently have to pay. In addition, they are proposing a ban on the import of new crypto-mining equipment.

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