Russia currently holds the second place globally in the cryptocurrency mining hash rate volume, after the United States, with the revenue of the industry’s largest players amounting to billions of rubles. Sergei Bezdelov, Candidate of Economic Sciences, Professor, and Director of the Association of Industrial Mining, which brings together leading industry players, shared with Invest Foresight how the market structure has changed since the mining law came into effect in August 2024, what trends are defining the industry’s future, and the role industrial mining is set to play in the development of artificial intelligence (AI).
Growth areas for mining
– Mr. Bezdelov, could you tell us about the key trends in the mining industry, its market volume, and participants?
– According to our estimates, the mining capacity will reach approximately 5 GW by the end of 2025. Since the mining law came into force in August 2024, the market has been growing, and many new participants have entered the industry. They are actively investing in capacity expansion, including the construction of infrastructure facilities and data centers. Many of them are in the final stages of their investment projects and will soon be ready to commission new facilities. Consequently, the number of players and the structure of the mining market could adjust significantly. I believe we will hear about new data centers and mining infrastructure operators entering the market as early as the beginning of next year. And these will be fairly large players.
– Are we talking about capacities powered by the electrical grid, or are other types of projects also being developed now?
– The industry’s infrastructure is not only growing actively today but is also undergoing a significant transformation. While previously the majority of capacity was grid-connected, we are now seeing an increase in the number of companies using gas generation for mining. Such players utilize gas piston power units. The possibility of creating coal-powered generation facilities is also being explored; this became particularly relevant after the Eastern Economic Forum where Russian President Vladimir Putin called for increasing the efficiency of coal utilization.
– To what extent have these new energy sources altered the market structure?
– Currently, about 80% of participants still operate “on-grid,” utilizing the power networks. However, the share of gas generation is now growing rapidly in the market: 15–20% of capacity runs on gas. The remaining participants utilize the potential of other energy sources, including coal and others. But this structure is also changing quickly, which is important to understand.
A time of opportunity
– Where might new mining infrastructure operators emerge?
– When mining depended solely on grid electricity, the industry’s infrastructure was shaped by the power grid itself. Major facilities were concentrated in Siberia, and to some extent in the Urals, areas known for abundant energy resources and low electricity costs. Today, with mining increasingly powered by gas, coal, and even hydroelectric sources, these rigid geographical limitations have largely disappeared.
– Do you expect new entrants from the oil and gas sector to join the industry?
– I believe so. Major companies are already showing interest in mining as a potential tool, and our Association is in active dialogue with them.
– Has the new mining law affected activity within the industry?
– For businesses – including large corporations – it has been a major catalyst. After years of operating without regulation since 2015, the industry has now been formally integrated into the Russian Federation’s national economy. Market participants are working under clearly defined legal frameworks, paying taxes, and lawfully using digital currencies such as Bitcoin, which are recognized as derivatives of mining activity. Importantly, for large companies engaged in international operations, cryptocurrencies can now be used for cross-border trade transactions. This has become possible through the Experimental Legal Regime (ELR) introduced by the Bank of Russia under Federal Law No. 258-FZ of July 31, 2020, On Experimental Legal Regimes in the Sphere of Digital Innovation in the Russian Federation.
For oil and gas companies, the rise of gas-powered mining opens new avenues for monetizing existing operations. Instead of flaring associated gas, they can repurpose it to power cryptocurrency mining. However, it’s crucial to remember that associated gas must first be properly purified, otherwise, impurities can quickly damage the equipment used in gas-based power generation.
– How will this affect the country’s economic development?
– Beyond the increased tax revenues, since all industry participants registered with the Federal Tax Service now pay income tax, mining companies are contributing to broader business activity and strengthening regional economies.
As gas-powered mining expands, more companies will establish operations across various regions, creating new centers of growth and opening fresh opportunities for development. In areas with a strong mining presence, the labor market is also evolving, leading to the creation of new jobs and the emergence of a more diverse workforce structure.
Cryptocurrency vs. AI
– Abroad, mining capacities are being repurposed for artificial intelligence. Is this trend relevant to Russia?
– Industry participants in Russia are actively contributing to the development of the AI sector by offering their infrastructure and computing power for commercial AI projects. This global trend is very much taking shape in Russia as well. It represents an important mission – expanding access to artificial intelligence tools for a broad range of users. The state is setting the strategic direction for this growth through initiatives such as the federal project Artificial Intelligence and the national project Data Economy and Digital Transformation of the State. Within this framework, mining market participants – data centers and mining infrastructure operators – are becoming key drivers of AI development in our country.
– How much do they compete with major tech companies that are actively launching AI solutions at the market?
– Large corporations, including state-owned enterprises like Yandex, Sberbank, Gazprom Neft, and others, are indeed developing AI-based solutions. However, their focus is primarily on enterprise corporate system, including those tailored to their specific industry needs. Meanwhile, there remain many sectors and niches – such as agriculture, healthcare, construction, and others – where AI adoption has been limited, despite the significant potential of the technology. AI is particularly effective in repetitive, uniform processes, where smart systems can replace human labor. This gap presents an opportunity for other market players, including those involved in building infrastructure for cryptocurrency mining.
– Is the Association of Industrial Mining involved in this process?
–The companies within our Association are extensively contributing to the development of the national AI industry by providing the necessary computing power. Among our key initiatives is the creation of the Neurolab AI technology center in partnership with industry leaders like BitRiver and Intelion, as well as the New People parliamentary party. Neurolab is already piloting ready-to-deploy AI solutions for small and medium-sized businesses. These boxed solutions are designed for easy scaling and rapid market adoption.
Operating within regulations
– What challenges is the industrial mining sector currently facing?
– One major challenge is the lack of clear regulations regarding potential mining bans, particularly as regards operation restrictions in specific regions of the country. Obviously, the industry needs a formal framework that outlines the conditions under which mining operations may be suspended. This uncertainty is the most critical issue for the sector right now, as it makes long-term planning challenging. Further development requires a clear planning horizon as industrial mining involves substantial investment both in hardware and in local infrastructure. Predictable electricity prices are also essential, as they are a major factor in financial planning.
– What steps can be taken to avoid such issues?
– Decisions about restrictions should be made in consultation with industry stakeholders. Our Association of Industrial Mining is actively engaged in this process, representing the industry’s interests and providing well-founded arguments during discussions on potential regulations. I can say that we have already seen positive results: for instance, following expert consultations, a decision was made against introducing mining restrictions in the Penza Region or the Republic of Karelia.
Another pressing issue concerns mining equipment. Certain companies in the industry are operating with hardware that was imported in violation of customs laws, prior to the enactment of mining-specific legislation.
On our part, we propose a solution: under certain conditions, such participants should be given the opportunity to legally rehabilitate. In this case, those who brought mining equipment in Russia in violation of its customs legislation could be exempt from criminal and administrative liability provided that they register as miners within a defined timeframe. This approach would support the industry’s transition to legal and transparent operations, broaden the official miner registry, and boost tax revenue.