Discovery of Secret Crypto Mining Facilities in Dagestan Russia

Given Russia’s recent pivot toward
cryptocurrency
adoption at the government level, one might assume that the era of underground digital asset operations is over in the country.
Recent developments have, however, proven that exactly the opposite may be happening and that some cryptocurrency mining operations have gone from being metaphorically underground to being literally beneath the surface.
To be precise, the authorities in Russia’s Republic of Dagestan have recently showcased a sophisticated cryptocurrency facility dug into the ground,
according
to a September 24 Reuters report.
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UNDERGROUND CRYPTO MINING FARMS DISCOVERED IN RUSSIA’S DAGESTAN
Authorities in Dagestan have uncovered illegal underground cryptocurrency mining operations in several areas.
In the Sergokalinsky district, over 15 mining machines were found hidden underground as owners…
pic.twitter.com/Z8DKYq023t
— Mario Nawfal (@MarioNawfal)
September 23, 2024
Part of the reason for this unorthodox approach is that the energy-intensive nature of operations involving digital assets has been drawing ever more scrutiny in recent years.
For example, companies seeking to mine Bitcoin (
BTC
) and other cryptocurrencies have to be compliant with a special government register, while individuals have to provide additional information to Russia’s Ministry of Finance.
Crypto miners allegedly trigger a fire in Dagestan’s capital
In Dagestan, digital asset miners have been associated with energy grid instability, including a substantiation fire in the regional capital of Makhachkala.
The fire also caused the Republic’s Prime Minister, Abdulmuslim Abdulmuslimov, to call on tighter control of such cryptocurrency operations.
Crypto miners facing high operating costs and regulatory scrutiny
In 2024, mining operations have been coming under increased pressure through various avenues. On the one hand, energy consumption has not only been a hot topic in Russia, but has been used as an argument against the industry across the globe.
For example, the U.S. Energy Information Authority
estimated
in February 2024 that mining-focused firms in America account for between 0.6% and 2.4% of total electricity consumption in the country.
Simultaneously, the April Bitcoin halving has threatened miners’ profitability. Indeed, JPMorgan (NYSE:
JPM
) estimated in May that it cost approximately $45,000 to mine 1 Bitcoin.
Such a high cost means that, despite BTC’s overall strong performance in 2024, there is relatively little margin for miners and a cryptocurrency market plunge could be devastating for the industry.


BTC YTD price chart. Source: Finbold
Russia approves international cryptocurrency transactions
Meanwhile, while the Prime Minister of the Republic of Dagestan has called for tighter control of cryptocurrency miners, the Russian Federation has, after some turbulence earlier in 2024, turned decidedly more digital asset-friendly.
Indeed, the State Duma, lower house of the Russian Parliament, approved the use of cryptocurrencies for international trade and other settlements in late July.
The decision was widely
interpreted
as a step in the country’s sanctions evasion program.