Residents of the Kabardino-Balkarian Republic, a small area in the North Caucasus, are persistently engaged in illegal cryptocurrency mining, according to local media reports. This activity continues despite the government”s strict prohibitions, leading to over a billion rubles in damages to local utilities this year alone.
The ongoing crackdown on illegal mining operations includes high-tech surveillance and the involvement of federal security agents. However, the local population finds it challenging to abandon this source of income, which provides financial relief in a region with limited legal job opportunities.
Recent findings by the local power distribution company revealed that mining rigs have been discovered in unusual locations, including abandoned buildings. These rigs are often concealed within insulated boxes to muffle noise and evade detection. As reported by the RIA Novosti news agency, the local branch of Rosseti North Caucasus calculated that these operations have resulted in the theft of 764,000 kilowatt-hours of electricity, equating to more than 5.8 million rubles, or over $75,000, in losses.
Utility officials announced the latest discovery in the village of Stary Cherek, where mining equipment was found connected illegally to the power grid. Such small-scale mining operations are often set up in former industrial sites, making them harder to detect due to their relatively low energy consumption.
Law enforcement agencies are now preparing to initiate criminal proceedings against these rogue miners under an article of the Russian Criminal Code that addresses property damage caused by fraud. Convictions under this statute carry a potential prison sentence of up to five years.
In 2024, Russia officially regulated crypto mining, marking it as the first legal cryptocurrency activity in the country. Nevertheless, the high concentration of mining facilities in certain regions has led to increased energy shortages. Consequently, mining activities have been restricted during peak electricity consumption periods in various regions, including the North Caucasus, where the strictest bans are enforced. Illegal mining activities in this region are estimated to have caused damages totaling 1 billion rubles ($13 million) to local utilities in 2025.
Under current laws, businesses and individual miners can legally participate in the mining sector if they register with tax authorities. However, most continue to operate in the shadows. A proposed amnesty aims to encourage these miners to emerge from the underground economy.
While mining has recently gained recognition as a valuable export for Russia, significant investment is required to enhance energy generation capacities to meet both mining and AI data center demands. The government has begun deploying advanced technologies to locate illegal mining operations, including methods to track energy consumption and internet traffic, as well as utilizing drones equipped with thermal imaging.
Federal Security Service (FSB) agents are frequently involved in operations to dismantle such illegal setups, as evidenced by a recent raid in Chelyabinsk that uncovered a substantial mining facility allegedly owned by the son of a prominent political figure.
As the situation develops, the challenge remains for Russian authorities to balance the potential benefits of legalized mining with the pressing issues of energy consumption and regulatory compliance.
