Moscow-backed authorities in Abkhazia have dropped an ineffective blanket ban and imposed regulatory measures on cryptocurrency mining. These are aimed at easing the heavy burden on the grid, as the region braces for the rolling blackouts due to shortages.
The resolution adopted by the occupied region’s government on September 21, introduces a sixty-day restriction on the import of computers designed for cryptocurrency mining, while other new measures restrict electricity consumption, introduce crypto-mining permits, hike electricity tariffs, and slap new taxes on miners.
The Abkhaz ministry of economy was tasked with developing a legal framework and definition for crypto-mining activities and the government-owned “Chernomorenergo” enterprise is to determine the level of permissible power consumption and set limits for cryptocurrency mining.
According to the new regulations, persons intending to engage in crypto-mining would have to register as legal entities and undergo tax registration, certificates of which will be provided by the ministry of economy no later than November 7. The registered entities will then be required to apply for permits to use of electricity, no later than November 21.
The decision also annulled 2018 temporary measures imposed by the previous Abkhaz leadership that prohibited crypto-mining in order to “limit electricity consumption.”
Despite the nearly two years of crypto-mining prohibition, the earlier restrictions did not prohibit importing mining equipment, and illegal cryptocurrency went on unhindered.
The region’s customs chief Guram Inapshba reported that in the first half of 2020, the region received RUB 6 million (USD 80,000) in taxes from the import of mining equipment. Inapshba added that in February alone, Abkhaz customs officers prevented 38 units of crypto-mining equipment from being smuggled into the region.
Electricity shortages have lately been prevalent in occupied Abkhazia, with authorities resorting to importing electricity from Russia in August, with talks of continued imports throughout fall, since forecasts have indicated to another shortage, expected in November.
Moscow-backed Abkhaz leader Aslan Bzhania had previously been vocal about the shortcomings in the electricity sector, saying low energy prices and crypto-mining were undermining the power supply.
Along with cryptocurrency regulations, the Moscow-backed region’s government on September 21 adopted new regulations on power usage, introducing progressive tariffs: persons engaged in crypto-mining will pay 4 times more than the basic household consumption fee.
Despite the new regulations on crypto-mining and the revised electricity tariff system, the electricity shortages may continue, since the repairs of the diversion tunnel at Enguri HPP, the major source of Abkhazia’s electricity, scheduled for February 2021, will further limit supply.
Enguri hydropower plant is a rare example of smooth cross-boundary cooperation between Tbilisi and Sokhumi. Enguri HPP’s 271.5-meter-tall concrete arch dam is located on the Tbilisi-controlled territory, while its five generators are on the Abkhaz side, in Gali district. Enguri HPP has been supplying Abkhazia for years and according to a long-standing, informal agreement between Tbilisi and Sokhumi, 40% of the electricity generated by the plant has to go to Abkhazia and the remaining 60% to the rest of Georgia. As of 2019, due to Abkhazia’s increased power consumption around 48% of electricity goes there, while 52% – to Georgia proper.
Levan Mebonia, Head of Enguri HPP, has previously stated that, since the plant will shut down during the repair, Abkhazia may have to purchase electricity from outside. So far, Abkhaz authorities have been in talks with Russian officials and specialists to ensure “the flow of electricity from Russia to Abkhazia” during the repairs.