The US Department of the Treasury has imposed sanctions on cryptomining company BitRiver, targeting one of the industry’s largest data-center service providers over its operations in Russia in its first such action.
The Switzerland-based firm offers energy sources, mining facilities and large-scale management solutions to bitcoin miners around the world, including those in eastern Europe and Russia. Such regions have been among one of the most popular destinations besides North America for miners that were forced out of China due to Beijing’s cryptomining ban in May last year.
The Treasury’s action comes just a day after the IMF said in a report that cryptocurrency mining could offer a pathway for countries, such as Russia and Iran, to bypass sanctions by putting natural resources that they are unable to export toward energy-intensive mining operations, such as bitcoin mining.
The Treasury on Wednesday echoed those concerns in a statement announcing the restrictions on BitRiver, including 10 of its Russia-based subsidiaries, as the war in Ukraine is set to enter a third month.
“By operating vast server farms that sell virtual currency mining capacity internationally, these companies help Russia monetize its natural resources,” the department said. “However, mining companies rely on imported computer equipment and fiat payments, which makes them vulnerable to sanctions.”
Bitcoin mining last year generated an average monthly revenue of about US$1.4 billion, of which about 11 percent might have gone to Russian miners, the IMF said.
BitRiver has not responded to a request for comment.
The sanctions on BitRiver could have an impact beyond the cryptomining industry in Russia by potentially redistributing and reducing the computing power for bitcoin mining around the globe, said Roman Zabuga, chief marketing officer at Hamburg-based BWC, a data-center operator for cryptominers.
If the computing power from the sanctioned businesses is disrupted, it would leave fewer places for miners to turn to for hosting their operations. The nearest mining facilities are in Kazakhstan, which has its own issues, while the US and Canada do not have readily available data centers and Europe is expensive, Zabuga said.
Meanwhile, miners that are not involved with BitRiver could potentially earn more bitcoin with the same computing input, or hash rate, because the difficulty of mining bitcoin would drop due to less competition from BitRiver’s miner clients.
This could set up a repeat of what happened after Beijing’s ban on cryptomining, which resulted in a sharp drop in global computing power and a multibillion-dollar windfall for miners in North America.
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