Cryptocurrency miners have set up shop in currently ungoverned "grey zones," allowing them to dodge both regulation and oversight as they work to accumulate wealth.
What's happening?
According to a report from the Royal United Services Institute, cryptocurrency miners in Eastern Europe have started to set up shop more and more in Russia's shadow territories of Donbas, Transnistria, and Abkhazia, exploiting the dirt-cheap gas power that Russia can provide while also operating in areas that lack governmental oversight because their ownership is unclear.
In each of these areas, RUSI said the energy required to run the operation costs next to nothing, courtesy of the Russian government. In Transnistria, for example, crypto mining operations are getting power from gas power plants for just over 4 cents per kilowatt-hour, while the coal plants in Donbas are providing energy at a similar rate.
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Why is sketchy cryptocurrency mining important?
These operations are running essentially outside the law, which opens up a number of problems. First and foremost, from an environmental standpoint, allowing these operations to run fully outside of regulation and monitoring makes it tough to track exactly how much power they're using. And since that power is largely coming from dirty sources like gas and coal plants, the operations are pumping significant quantities of planet-warming carbon dioxide and methane into the atmosphere.
Secondly, beyond the environmental impact, doing this in an area with less oversight opens the operations up to being used by people looking to make money quickly for less-than-legal purposes. For example, the RUSI report cited efforts by the Russian government and its agents to use these mining facilities to help fund the war in Ukraine.
What's being done about illicit cryptocurrency mining?
RUSI detailed that the U.S. Treasury Department has started finding ways to crack down on these mining operations. In 2024, it cracked down on an arrangement in which cryptocurrency was being used by Indian and Chinese banks to work around sanctions, but more is needed. The report called for restrictions and sanctions against these illicit mining operations.
"Too often, the West lags behind Russian evasion strategies with its restrictive measures," the RUSI report said. "When it comes to the vulnerabilities of bitcoin mining, the evidence is clear. It is time to act."
In other parts of the world, there have been efforts to improve the rate of renewable energy used for cryptocurrency mining, primarily via professional and state-sponsored operations. There is a mixture of optimism and pessimism that bitcoin could fund innovation and investment in clean energy, as it makes sense for a long-term investment to have your own renewable energy off the grid, though problems like this use of dirt-cheap energy in Eastern Europe remain.
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