Abkhazia Lifts Cryptocurrency Mining Ban After Two Years

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In Brief
  • The government in Abkhazia has lifted a ban on crypto mining.

  • Illegal mining became so popular in the terrority, the government decided to legalize and regulate it to prevent an energy crisis.

  • This come on the heels of increased regulation of crypto in Russia.

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The government of the partially recognized Republic of Abkhazia has lifted a two-year ban on cryptocurrency mining. The ban came into effect when mining farms brought the region to the brink of an energy crisis.

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The Republic of Abkhazia, a de facto state in the South Caucasus, has rebooted its crypto mining glory. According to the region’s official cabinet website, the new system will include regulation by the finance ministry and a two-month restriction on the importation of mining equipment.

During this period, the Ministry of Economics plans to develop a system regulating cryptocurrency mining, including an office to collect and analyze statistics and provide licenses.

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Likewise, the state power authority “Chernomoenergo” will set rules as to the amount of electricity used by these businesses.

Cabinet ministers prohibited mining in 2018 after farms threatened to use all of Abkhazia’s power. According to Jam news, Abkhazia became a Mecca of crypto mining because of the relatively low price of electricity. The business took up so much electricity, it threatened homes and stores with blackouts.

Russia’s Mining Ban Fiasco

The director of Chernomorenrgo, Ruslan Kvarichiya, said that the ban had the opposite of the intended effect. Technically, the law forbade mining equipment to be hooked up to Chernomorenergo’s grids. It did not, however, ban importing equipment into the territory. In the end, local energy companies had to deal with an unchecked increase in new farms.

The vice prime minister and minister of economics said that electrical engineers, “know better than anyone else,” how crypto mining continued to grow under the ban, an apparent hint at corruption.

The shadow economy of Bitcoin mining grew so large that, in September, the power grid once again approached a breakdown. To prevent a total energy collapse, ministers decided it would be better to legalize and regulate mining.

The Lesser of Two Evils

Though mining is booming in Abkhazia, its close neighbor Russia is a legal mess when it comes to crypto regulation. A Russian law will come into effect on Jan. 1, 2020, which bans somewhat inconsistent uses of crypto.

For example, while mining will not technically be illegal, miners will be unable to receive mining rewards in digital currency. While cryptocurrencies will be legal and regulated, using them as payment will be banned in the country.

Despite some nuances (for example, inheriting cryptocurrency) the new Russian law will be a headache for miners and traders. The legalization of mining in Abkhazia comes at an inopportune time, but considering the threat of the grid going offline, it may be the lesser of two evils.

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Harry Leeds is a writer, editor, and journalist who spent much time in the former USSR covering food, cryptocurrencies, and healthcare. He also translates poetry and edits the literary magazine mumbermag.me.

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