Tokyo-based online financial services company SBI Holdings will shut down its crypto mining operations in Siberia, Russia.
The company argued that the war between Russia and Ukraine is among the reasons behind this decision.
Pullout From Siberia
The pullout decision was taken in view of the geopolitical uncertainty due to the ongoing Russia-Ukraine war and a drop in crypto mining profitability due to a prolonged market downturn, media reports said on Friday, attributing the information to an unnamed SBI Holdings spokesperson.
“Chief Financial Officer Hideyuki Katsuchi announced the plan to sell machinery and withdraw earlier this week,” Bloomberg said in its coverage.
However, it’s not clear when it will complete the withdrawal.
The development follows the group’s decision to suspend mining operations in Serbia soon after the Russian invasion of Ukraine in February. Other than the mining rig in Serbia, SBI Holdings has no other crypto business in Russia. Its commercial banking unit SBI Bank LLC in Moscow will continue its operation.
Media reports said the decision contributed to a pretax loss of 9.7 billion yen ($72 million) and a net loss of 2.4 billion yen ($17.5 million) in the three months ending June 30. This was the group’s first quarterly loss in a decade.
Russia as a Mining Destination
Siberia was emerged as the sunrise crypto mining destination over the past few years, given the low energy costs. The trend picked up steam after China banned crypto mining operations in May 2021.
According to estimates provided by the Ministry of Industry of Russia in May 2022, crypto miners account for over 2% of Russia’s total energy consumption, more than that of agriculture.
Russian President Vladimir Putin is said to be keen on Russia emerging as a crypto mining hub, implying it can make use of “surplus electricity” and well-trained personnel.
Also, Russian lawmakers approved a bill draft in June that proposes to provide an exemption of value-added tax to “digital asset issuers” and their “information systems operators.”
Russian Crypto Mining Hits Roadblock
But the war seems to have put a spanner in Russia’s ambition to become a key mining destination.
In one of the first sanctions against a crypto mining company, the US Treasury Department went after BitRiver, one of the largest bitcoin mining companies, because of its Russia operations. However, US sanctions have not dissuaded BitRiver from launching a crypto mining project with Russian oil major Gazpromneft.
Among crypto miners, Compass Mining announced the closure of its mining operations in Siberia and offered to liquidate hardware worth $30 million.
Several high-profile companies, including Visa, Mastercard, and PayPal, left Russia in the wake of the US sanctions.