​Russia begins to identify illegal miners in residential buildings on a mass scale

What’s new? Deputy Energy Minister Pavel Snikkars said that Russia began to identify illegal miners in mass at residential buildings due to the volume of energy consumption and change in the load profile, Izvestia reports. According to him, even though the mining of digital assets is not yet regulated, it is possible to prove in court the use of electricity for illegal purposes. Ekaterina Avdeeva, head of the expert center for criminal law policy and enforcement of judicial acts of Delovaya Rossiya (Business Russia), said that there are already at least 10 cases where power supply companies were able to recover from miners the difference in the cost of electricity for the population and businesses.

Izvestia’s material

Details of the situation. Irkutsk power engineers began to charge for mining in residential buildings at preferential tariffs for the population according to load estimates at substations. Avdeeva specified that this problem was particularly acute for Irkutskenergosbyt in 2021 when the region became the “capital” of mining in Russia.

Snikkars explained that when suspicions arise regarding the use of electricity for entrepreneurial activities, an inspector is sent to the apartment to check the power installations. After that, the residents are charged a new bill with the price of electricity for the business, or they prove this fact through the court.

Managing partner of GMT Legal Andrey Tugarin stated that to prove entrepreneurial activity it is enough to find a discrepancy between the volume of electricity consumption and the average monthly norm. He said that the power supply company unilaterally changes the tariff and recalculates the amount owed. If the debt is not paid, the power is cut off to the miner. According to Tugarin, the court, as a rule, sides with the energy companies. He noted that today there is no positive practice of disputing debts by citizens.

According to Avdeeva, a situation where a resident consumes more than 30-40% of the consumption of the apartment building is considered suspicious. In addition, questions may arise due to a sharp increase in energy consumption. Employees of power supply companies can check the power installations of the tenant. If they find the mining equipment, the company will record it and present it in court. Avdeeva noted that none of the parties to such disputes have yet reached the Supreme Court of the Russian Federation, which could form a generalized regulation before the adoption of legislation.

Sergey Shakirov, a partner at Milton Legal, noted that mining in residential buildings can cause power grid overloads and accidents. Another frequent type of violation is unrecorded use of energy when the connection to the power grid occurs without permission at all, Shakirov explained. According to him, in this case, the miner may face not only a fine but also criminal liability under the article “Causing property damage by deceit or breach of trust” (Article 165 of the Criminal Code of the Russian Federation).

According to estimates by Leonid Delitsyn, an analyst at FG Finam, the revenue of Russian miners in 2022 will reach 60-80 billion Russian rubles (RUB). In turn, Oleg Ogienko, BitRiver’s director for government relations, noted that the total amount of power consumed by mining is about 1,7 GW, and 50-60% of the volume accounts for the industrial segment. He added that the concept of “illegal mining” is absent, as this area of activity has not yet been introduced into the legal framework and regulated.

Valery Dzubenko, Deputy Director of the Association “Energy Consumers Community,” explained that when using the resource for entrepreneurial activity, residents must pay for it at the rates for businesses, not at a reduced cost for the population. Electricity consumption in the residential sector is accounted for at preferential rates, the difference between it and the full cost is paid by businesses and organizations of the budgetary system.

Ogienko noted that the industrial data centers for mining buy electricity at prices for businesses, and when a large consumption of cryptocurrency mining is taken into account at the rates for the population, businesses have to overpay. According to the expert, this problem can be solved through tariff regulation, as well as through the registration of mining equipment. Then this activity will be controlled by the authorities, Ogienko believes.

Evgenia Burova, PR director of the Garantex cryptocurrency exchange, named another option to solve the problem. She believes it is necessary to establish preferential tariffs on electricity for the population within the socially necessary volume and a market price for consumption above this level. Burova noted that in regions where the cost of electricity for households is subsidized, the tariffs for businesses and the population may differ by three to four times.

She added that most apartments and private houses have a consumption limit of 10 kilowatts, which limits the “fleet” of equipment for mining to two or three devices, and the monthly revenue minus electricity costs to 30 000-40 000 RUB. Thus, the most high-profile cases of illegal mining are related to the theft of electricity from networks through illegal connections.

On November 17, the draft law was submitted to the State Duma of the Russian Federation, which suggests allowing the sale of mined cryptocurrency both on foreign platforms and in Russia — through a special platform to be created in the framework of the law on experimental digital regimes. When selling crypto assets, it will be necessary to notify the Federal Taxation Service. In addition, the Central Bank supported the draft law on the regulation of mining, prepared with its participation.

In July, Yarenergo published a tender on the government procurement website for statistical reports and interactive “heat maps” for identifying mining farms. The contractor must have a license from the Federal Security Service to work with information constituting state secrets.

In August, as part of the fight against gray miners, the Irkutsk Region and the Republic of Khakassia announced the introduction of a differentiated payment system for electricity for individuals on the principle “the more you consume, the more expensive each kilowatt hour.”

In 2021, the most popular regions for mining in Russia were Moscow, the Moscow Region, Karelia, Buryatia, as well as the Sverdlovsk, Murmansk, and Irkutsk Regions, the Krasnoyarsk Territory, and the Republic of Khakassia.

For more details on how the mining industry works in Russia, see GetBlock Magazine’s article.