US Sanctions Bitriver, Targets Russia’s Crypto Mining Potential

US Sanctions Bitriver, Targets Russia’s Crypto Mining Potential

The U.S. Department of Treasury has sanctioned leading Russian mining firm Bitriver in an attempt to deny Russia opportunities to evade sanctions through cryptocurrencies. The move will address concerns that Moscow could use the minting of digital coins to monetize its energy resources.

The United States has blacklisted Zug-based Bitriver and its Russian Subsidiaries

The U.S. Treasury Department has for the first time taken action against Russian crypto miners that could ostensibly facilitate Moscow’s efforts to circumvent international restrictions imposed over the war in Ukraine. The Office of Foreign Assets Control (OFAC) has blacklisted Bitriver and a number of affiliated companies in a new round of sanctions against Russian entities and individuals.

The Treasury noted it’s specifically targeting enterprises in Russia’s crypto mining industry. In an announcement, it said, "By operating vast server farms that sell virtual currency mining capacity internationally, these companies help Russia monetize its natural resources," an announcement that echoes concerns expressed by the International Monetary Fund (IMF) as well.

The department elaborated that Russia has a comparative advantage in crypto mining due to its abundant energy resources and cold climate. However, mining companies rely on imported computer equipment and fiat payments, which makes them vulnerable to sanctions, it pointed out in a statement, further emphasizing:

"The United States is committed to ensuring that no asset becomes a mechanism for the Putin regime to offset the impact of sanctions."

Bitriver is a major operator of mining datacenters that was founded in Russia in 2017. It has three Russian offices with 200 full-time employees and maintains a presence in several other countries, including the U.S. Last year, Bitriver transferred the legal ownership of its assets to Zug, Switzerland-based holding company Bitriver AG.

OFAC has also blacklisted ten Russia-based subsidiaries of Bitriver AG: OOO Management Company Bitriver, OOO Bitriver Rus, OOO Everest Grup, OOO Siberskie Mineraly, OOO Tuvaasbest, OOO Torgovy Dom Asbest, OOO Bitriver-B, OOO Bitriver-K, OOO Bitriver-North, and OOO Bitriver-Turma. American citizens, residents, and entities cannot legally do business with them.

According to its website, Bitriver specialises in providing hosting services and turnkey solutions for large-scale crypto mining, data management, blockchain, and AI operations to institutional investors. The company brands itself as the "world’s largest hosting provider for green cryptocurrency mining" as it utilizes hydroelectric power to run its mining facilities.

Pro-Kremlin Oligarchs Hit by U.S. Sanctions

A report by Bloomberg in late 2019 linked Bitriver’s mining centre in the Siberian city of Bratsk to the energy firm En+ Group Plc. and its unit United Co Rusal. Russian billionaire Oleg Deripaska had control of the two companies.

For reasons related to Russia’s annexation of Crimea in 2014, Deripaska was sanctioned by the U.S. in 2018. The entities were also under sanctions for almost a year before the oligarch reached an agreement with the U.S. Treasury to reduce his control, an article has revealed.

OFAC has also designated the Russian commercial bank Transkapitalbank and more than 40 individuals and entities led by another Russian oligarch, Konstantin Malofeyev. The agency claims these actors’ "primary mission is to facilitate sanctions evasion for Russian entities."

Malofeyev is on U.S. and EU sanctions lists and is wanted by Kyiv for his involvement in the war in the Donbas region. The businessman, who owns the Tsargrad Media Group and supports President Vladimir Putin, has been accused of financing the pro-Russian separatists in Eastern Ukraine.