Republic of Abkhazia regulates crypto mining to get through the winter

The little nation of Abkhazia unrecognized lies on the East coast of the Black Sea, North of Georgia. Formerly part of Soviet Georgia, it is still not recognized as independent by the international community since its independence war in 1993. It currently homes a population of under 4 million people. In recent years, cryptocurrency mining operations have been erected in abandoned Soviet factories and in people’s home.  The troubled power-supply system is now struggling under the increasing pressure of the mining facilities.

Aslan Basaria is the CEO of the state-owned energy company called Chernomorenergo. Reported by the local news agency Ekho Kavkaza, he said that:

“We have the so-called mining farms, set up on the premises of abandoned or partly abandoned factories. This puts additional load on our grid, the transmission lines and substations that are loaded to capacity even without it. If temperatures fall, there is a risk that electricity will not reach regular customers.”

Georgia and Abkhazia are both heavily invested in cryptocurrencies. What they also share is a big hydro-power complex which provided the main source of electricity supporting the mining activities. However, in the winter when the water levels are low and the electricity consumption is high, the reservoir cannot produce enough to support both sides’ needs.

CEO Basaria emphasized that since the mining facilities are continually increasing their electricity consumption, there is a running risk that it could take up too much of the region’s power: “It turns out that we see a risk situation occurring: if it gets colder, we will not be able to supply enough electric energy to the population anymore.”

Basaria complained to President Raul Khadjimba that the crypto miners are endangering the electric power supply in the country. He urged the government to come to an agreement on a framework to regulate the energy allocation. The president agreed, and consequently, legislation on cryptocurrency mining is being drafted.

Perhaps surprisingly, as of 2017, Georgia was ranked as second in the world for crypto mining as per power consumption, after China. The figure would thus include Abkhazia into the calculation. It seems that the statistics for the following years will shift around.

“Given the limitations associated with the status of the republic… we always seek non-conventional solutions to reach an acceptable level of [economic] development,” said Abkhazia’s Minister of Economics, Adgur Ardzinba.

In 2017, Ardzinba began advocating the idea of creating a national cryptocurrency – AbkhaziaCoin (ABHCoin).

Bitnovisti reports that the minister “believes that digital currency would provide for attracting investments into the country’s economy and circumventing all sorts of political and economic blockades and embargoes.” An organizer from the 2017 Moscow conference on the subject said: “This is a serious project which can completely change [local] industry.”

Since cryptocurrencies are free of regulation, for the time being, they can be a helpful asset and investment for “twilight zones” like Abkhazia. While it fosters independence, it is unclear how the nation will find a solution to its energy shortage with the big crypto plans coming up.

Also read: Two South Korean government ministries are exploring Blockchain’s potential to bring new efficiencies to marine logistics