Behind Russia's Bitcoin Boom: Crypto Mining in the "Shadow Regions"
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Behind Russia's Bitcoin Boom: Crypto Mining in the "Shadow Regions"
Russia's "shadow regions" are conducting large-scale Bitcoin mining to circumvent sanctions and accumulate wealth.
Navigating Web3 tides with focused insightsAuthor: Neil Barnett, RUSI
Translation: Felix, PANews
In a world where the Kremlin is increasingly isolated and focused on foreign influence operations, there is strong motivation to engage in Bitcoin mining for cross-border activities. As Russia’s natural gas markets shrink, converting surplus energy into electricity and then into cryptocurrency has become increasingly common. Since 2018/19, this phenomenon has occurred on a large scale in Russia's "shadow territories" (Transnistria, Donbas, and Abkhazia). These legally ambiguous jurisdictions enable concealment of activities and allow for the plundering of Russia’s natural gas and electrical resources. Moreover, as typical in post-Soviet Russia, private-sector actors are carrying out covert operations.
Turning Cheap Energy into Anonymous Money
The anonymity of Bitcoin is contested by crypto advocates who point out that Bitcoin is traceable and that cryptocurrencies actually offer unprecedented transparency. While this is partly true, several methods exist to obscure trails for malicious purposes. These include using mixers like Tornado Cash to obfuscate on-chain tracking; utilizing the dark web system known as “The Onion Router” (Tor); or simply purchasing offline Bitcoin wallets from owners at a cash premium. Mining new Bitcoin also offers a degree of protection, as tokens have no transaction history when first transferred, thus providing no data trail to investigators.
Bitcoin mining requires computational power. Because the system is decentralized, Bitcoin’s designers incentivize those who contribute processing power by rewarding nodes that validate network transactions with newly minted Bitcoin. “Bitcoin miners” invest in specialized servers—“mining rigs”—to perform these calculations and generate new coins.
The key cost variable in Bitcoin mining is the energy required to power these servers, which is one reason why Russia’s “shadow territories” are attractive. A September 2024 study by Nftevening.com found that “Bitcoin mining costs $321,112 in Ireland, but only $1,324 in Iran—a difference of over 240 times.” Even with Bitcoin approaching $100,000, mining remains uneconomical in many jurisdictions.
Transnistria, Donbas, and Abkhazia do not rank among the top 10 cheapest regions for Bitcoin mining because they are gray zones outside sovereign government control. Furthermore, their methods of obtaining electricity are not captured in surveys, which rely on officially reported national electricity prices. If electricity costs approach zero and the region lacks international recognition, such research methodologies fail.
Gray Zones
The “shadow territories” of Transnistria, Donbas, and Abkhazia—all under Russia’s de facto “protection”—offer unique opportunities for Bitcoin mining to those aligned with the Kremlin.
Transnistria: Uses energy from the MGRES power plant, fueled by free natural gas supplied by Gazprom. A technology park established to attract miners offers electricity at $0.043 per kWh.
Donbas: Has used coal-fired power plants since 2021—electricity originally intended for heavy industry. Electricity stolen from the Zaporizhzhia nuclear plant may also be used. Reports indicate a mining center at the Donetsk Metallurgical Plant, along with at least one other facility, both operating under the protection of the Federal Security Service (FSB).
Abkhazia: Has used hydropower from the Enguri hydroelectric station on the Georgian border and imported Russian electricity since 2015/16. Electricity costs as low as $0.005 per kWh. However, open-source reports show a sharp decline in mining activity in both Abkhazia and mainland Georgia since 2023.
Transnistria: The Ideal Bitcoin Mining Environment
Transnistria’s access to free Gazprom gas and substantial power generation capacity makes it an exceptionally attractive location for Bitcoin mining.
The critical factor lies in the arrangement between Moldova proper and Transnistria regarding gas supply and power generation. Both regions receive Gazprom gas via pipeline, and billing occurs through a contract between Gazprom and Moldovagas (50% of which is controlled by Gazprom). However, while Moldova pays for its gas, Transnistria’s consumption is nominally added to Moldovagas’ disputed $709 million debt—amounts unlikely ever to be repaid.
Since Maia Sandu became President of Moldova in 2021, the country has reduced its reliance on this energy source. But one thing hasn’t changed: Transnistria effectively receives free gas to fuel the 2,500 MW MGRES power plant. Moldova itself relies on MGRES for about 80% of its electricity, illustrating a strange interdependence between otherwise hostile entities.
This free energy is a Moscow subsidy designed to keep Transnistria’s outdated, polluting, and inefficient heavy industries—chemicals, steel, cement—operational. It also provides extremely cheap household gas, helping consolidate public support for the local regime.
Data from the Moldovan government reveals the scale of this subsidy: Transnistria (population 300,000) consumes around 2 billion cubic meters of gas annually, while Moldova proper (population 2.5 million) uses about 1 billion. At delivery points, per capita gas receipt in Transnistria is roughly 16 times higher than in Moldova (though this figure is partially offset by the fact that some Transnistrian gas is used at MGRES to generate electricity sold back to Moldova). Whether this will continue beyond 2025 is uncertain, given Ukraine’s refusal to renew its gas transit agreement with Gazprom.
Currently, the site offers an almost perfect environment for Bitcoin mining. Given MGRES’s abundant power capacity and access to free gas, the incentive to mine Bitcoin is clear. In 2018, Transnistria passed legislation providing a clear legal foundation to accelerate cryptocurrency mining.
In 2019, a state-backed mining zone called “Tehnopark OJSC” was heavily promoted to attract foreign miners, offering electricity at $0.043 per kWh—a highly competitive rate. According to BestBrokers.com research, Kazakhstan charged $0.073 per kWh in 2024, and the U.S. averaged $0.127. With Transnistria receiving free gas, this price could be among the lowest in the world.
Based on BestBrokers.com data, each Bitcoin currently consumes 854,403 kWh (a figure that has risen sharply in recent years). Using these figures, the electricity cost per Bitcoin in Transnistria would be $36,739, compared to a Bitcoin price of around $97,000. The equivalent figures are $62,371 in Kazakhstan and $108,509 in the U.S. (this U.S. number is a national average; miners may operate in cheaper states).
However, since 2019, there has been little further reporting, and the Tehnopark website is no longer online, although it remained active until 2022. This does not mean Bitcoin mining ceased in Transnistria, but rather reflects that international miners (excluding Russians) did not flood into Tiraspol as hoped. Under wartime conditions and with operational discretion required, publicity became unnecessary.
Moldovan NGO Anticoruptie reports that major mining players include Goweb International Limited and Tirastel GmbH.
While Western investors are allegedly involved, the “investors” are primarily Russians linked to Gazprom—beneficiaries of the partial gas subsidies provided by Gazprom to Transnistria.
Goweb International Limited presents a notable case. According to Anticoruptie, in January 2018, the British Virgin Islands entity Goweb International Ltd spent $8.7 million purchasing crypto mining equipment shipped to Transnistria, with funds routed through Latvia’s ABLV Bank. The following month, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) designated ABLV as a “primary money laundering concern” due to institutionalized money laundering linked to Azerbaijan, Russia, and Ukraine. ABLV was also central to the 2016 “money laundering scandal” in which $1 billion was stolen from Moldovan banks.
Anticoruptie’s report states:
“Goweb International Limited is an offshore company managed by a group of Russian businessmen led by Nikita Morozov, specializing in the production and marketing of mining equipment.
The company’s official website claims it holds Moldova’s largest mining capacity—40 MWh—equivalent to six to eight mining farms.”
With Russia’s full-scale invasion of Ukraine in February 2022, Moscow’s ability to sell gas internationally diminished, increasing the Russian state’s incentive to redirect gas toward Bitcoin mining.
How Bitcoin Is Used
There is strong reason to believe that Bitcoin mining in “shadow states,” though conducted by private-sector actors, operates with Kremlin backing. In Transnistria, this connection is particularly evident due to the direct involvement of Igor Chaika. He is nominally the Transnistrian representative of the Russian business organization “Delovaya Rossiya,” but is widely known as the de facto head of the FSB in the region.
Chaika is the son of former Russian Prosecutor General Yury Chaika (2006–2020), closely associated with the Kremlin’s abuse of the judicial system. His father now serves as Putin’s envoy to Ramzan Kadyrov in Chechnya. Meanwhile, his other son, Artyom Chaika, is a businessman serving as Kadyrov’s advisor on “humanitarian, social, and economic affairs”—a role presumably allowing ample time for other pursuits.
In 2018, the Balkan Investigative Reporting Network in Chișinău reported during the early stages of Bitcoin mining in the region:
“Chaika later told the Russian daily Kommersant that he intended to push forward with the Bitcoin project. ‘Now the prerequisites exist to move forward.’ ‘We agree with the Tiraspol administration that once the law takes effect, authorities will provide infrastructure for our projects. We await their suggestions on locations for establishing mining farms.’”
Wired reported that Chaika “stated his readiness to invest 4 billion rubles in cryptocurrency mining in Transnistria.”
According to Swiss SECO sanctions imposed in August 2024 on Igor Chaika, he is responsible for funding FSB-led destabilization activities in Moldova proper. The Swiss statement notes his close cooperation with Dmitry Milyutin, Deputy Director of the FSB responsible for Moldova. Additionally, Chaika is listed alongside Moldovans implicated in destabilizing the state—including Ilan Shor and Vladimir Plahotniuc—with the citation stating:
“Igor Chaika is a Russian businessman responsible for fundraising for Russian Federal Security Service (FSB) projects aimed at destabilizing the Republic of Moldova. He acts as a Russian ‘treasury,’ channeling funds to FSB assets in the Republic of Moldova to bring the country under Kremlin control…”
Given Chaika’s role since 2018 in establishing Russian–Transnistrian Bitcoin mining cooperation, the resulting Bitcoin is likely being used to destabilize Moldova.
The use of Bitcoin to support Kremlin subversion extends far beyond Moldova. For example, a loophole in U.S. law allows political donations under $200 to remain anonymous. Large sums can be automatically split and electronically transferred as small donations, with cryptocurrency adding another layer of anonymity. In 2020, Trump’s campaign received $378 million this way, while Biden’s raised $406 million. Neither campaign nor the Federal Election Commission could determine the origin of nearly $800 million in funds.
In 2018, the U.S. Department of Justice indicted Netyksho and others, accusing them of being members or accomplices of GRU (Russian military intelligence) Units 26165 (“Fancy Bear”) and 74455 (“Sandworm”). The indictment attributed DCLeaks and Guccifer 2.0 to this group:
“Although the conspirators transacted in multiple currencies, including U.S. dollars, they primarily used Bitcoin to purchase servers, register domains, and pay for hacking operations…”
Cryptocurrency is equally effective for evading sanctions and paying for embargoed military equipment. This is especially useful when working with partners like India, where banks face secondary sanctions if caught. In September 2024, the Financial Times published leaked documents detailing the establishment of India–Russia “closed-circuit” trade routes to evade sanctions:
Poida outlined a five-phase plan to help Russia use rupees and establish a stable supply of dual-use components. Russia would create a “closed payment system” between Russian and Indian companies, outside Western oversight, “including the use of digital financial assets.”
In November 2024, the U.S. Treasury sanctioned four employees of VTB Shanghai and Sberbank New Delhi branches—likely a warning shot to the banking sector. Such restrictions are expected to increase Bitcoin’s appeal as a settlement mechanism, as it avoids exposing local banks to risk.
Given this analysis, Bitcoin mining in Russia’s “shadow regions” represents an undeniable, profitable, and effectively anonymous method of converting vast amounts of energy into money. This wealth enriches well-connected Russians, enabling luxurious lifestyles in Dubai, Turkey, and elsewhere.
It also poses multiple threats: destabilizing neighboring countries, secretly influencing Western democracies, and facilitating sanctions evasion in collaboration with allies like India.
As Ukraine’s allies continue efforts to restrict funding and resources for the Kremlin’s illegal war of aggression, countering this mining activity is a critical priority requiring dedicated action. This could include cyber operations; blockchain tracking of newly minted coins to expose those tied to Russian illicit activities; sanctions on digital asset platforms enabling mining; and policies cutting off cheap energy to “shadow regions.” Western restrictions often lag behind Russian circumvention tactics; in the case of Bitcoin mining vulnerabilities, the evidence is clear.
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