Mining in Russia vs mining in Belarus: comparing risks and opportunities

Russian miners, increasing Bitcoin production for the upcoming halving, are overloading the energy grid, and officials are considering raising tariffs. Will this lead to an outflow of miners to neighboring Belarus? Market participants shared with Bits.media their experience of legal cryptocurrency mining in the Republic of Belarus and assessed the prospects for scaling Russian mining.

How is mining different in Belarus?

Until January 2025, according to the decree “On the development of the digital economy”, crypto-assets and transactions with them in Belarus are not recognized as objects of taxation. Individuals can mine cryptocurrencies without restrictions and taxes. And also wound, exchange for other crypto assets and fiat money.

Among legal entities, only residents of the High Technology Park (HTP) can mine cryptocurrency. Residents of this special economic zone can make any transactions with crypto assets without paying income tax.

How to become a HTP resident

According to the HTP rules, only a legal entity registered in Belarus can obtain resident status. A foreign company that wants to operate legally must open a subsidiary in the country. After registration, she can apply for HTP resident status. To enter the Hi-Tech Park, documents are submitted to the HTP Supervisory Board, attaching a business plan for your project. The project is undergoing scientific and technical examination.

When preparing a plan, you should rely on the methodological recommendations of the HTP and disclose in detail: infrastructure, equipment, energy sources, partners for the sale of mined cryptocurrency. It is important to justify both classic financial indicators and industry-specific ones — volumes of coin production and sales, mining costs. The HTP Council studies the previous activities of the company, the size of the authorized capital, personnel, etc.. A legal entity can register and operate in any region of Belarus. Attracting investments is allowed through options, convertible loans and shareholder agreements.

Resident companies are promised simplified document flow with foreign partners; for hired foreign specialists, a visa-free regime is possible for up to 180 days. There is a zero rate for VAT, income tax, customs duties and offshore taxes.

Currently, 17 residents are engaged in mining in the HTP: AtomMetaService, Bel-Bitfinder, Bitfurmi, Blockchainbay, BNKCrypto, Greenminer, United Mining Company, MinersGate Technology, Mining Brothers, «RETAIL CONSULT», «MineStone», «Sibirmhub», «Scalaxy», «Fintech Capital and Custody», «HUA GUANG», «Cyber Genesis», «MetaForce Technology».

Russian and Chinese investors are interested in cryptocurrency mining in Belarus, assures the Minister of Energy of the Republic of Belarus Viktor Karankevich.

Preferential rates

Interest in mining finally formed in Belarus in 2022. Reason: due to sanctions, the country completely stopped exporting electricity and allocated 38.58 billion kWh for domestic needs. Local consumers were unable to fully absorb the increased volumes of electricity.

Mining ensures a stable round-the-clock demand for electricity and loads the capacity of power plants during periods of minimum consumption. This is especially true at night, Andrey Negodko, head of the Belenergo strategic development department, explained to Bits.media.

In order to attract mining companies to Belarus, they are given the opportunity to pay for electricity at a preferential tariff, almost comparable to household tariffs, for individuals.

Tariffs for private miners

Unlike the Russian Federation, there is a single tariff schedule throughout the entire territory of the Republic of Belarus. Individuals in the city can choose one of several current tariffs:

Tariff based on consumption volume — a single tariff regardless of the time of day. From January 1, 2024, it will increase to 0.1901 Belarusian rubles / kWh (5.42 Russian rubles) for apartments with gas and to 0.1616 Belarusian rubles (4.56 Russian rubles) for apartments with electric stoves.

Two-part tariff — different tariff for daytime (from 17:00 to 22:00) and night time (from 22:00 to 17:00). From January 1, the night tariff will be 0.1131 Belarusian rubles/kWh (3.2 Russian rubles), the daytime tariff will be 0.3232 Belarusian rubles/kWh (9.2 Russian rubles).

Three-rate tariff — the tariff is divided into 3 zones: night (from 23:00 to 06:00)—0.097 Belarusian rubles/kWh. (2.77 Russian rubles), and peak (from 17:00 to 23:00) — 0.2909 Belarusian rubles (8.2 Russian rubles). The rest of the time — 0.1131 Belarusian rubles (3.2 Russian rubles).

In rural areas and small towns a different system is used:

The one-rate tariff for rural residents is 0.1704 Belarusian rubles/kWh. (4.84 Russian rubles).

There is also a reduction factor of 0.7 for people living in houses without gas supply. That is, the real tariff for them will be about 0.12 Belarusian rubles / kWh (3.4 Russian rubles).

For gardening partnerships, preferential tariffs range from 0.12 to 0.15 Belarusian rubles/kWh (from 3.4 to 4.26 Russian rubles), depending on consumption volumes.

To pay for electricity at a temporary tariff, an individual enters into an agreement with the energy company and installs a special meter.

Tariffs for mining companies

Mining companies in Belarus consuming more than 15 million kWh pay for electricity at four different tariffs depending on consumption volumes. To do this, you need to enter into an agreement with an energy organization and consume the agreed volumes of electricity:

Volume of energy consumed per year, million kWh Cost, in Belarusian rubles excluding VAT Cost in Russian rubles excluding VAT Cost in US dollars from 15 to 50 0.18641 4.9 0.0587 from 50 to 300 0.17444 4.6 0.0549 from 300 to 500 0.16248 4.2 0.05 11 from 500 0.15492 4.1 0.0488 The figures are given for the value of the Belarusian ruble = 3.7835 Russian ruble.

The tariff for other legal entities in the country is 0.43912 Belarusian rubles (11.6 Russian rubles) per kilowatt.

“To take advantage of preferential tariffs, you must consume at least 15 million kWh per year, then the payment for the electricity used will be 0.18641 Belarusian rubles (4.9 Russian rubles). — explains IT specialist of the Belarusian company “United Mining Company” Alexander Lelikov. “After the introduction of a specialized tariff, with a minimum annual consumption of 15 million kWh, which included miners, the company’s management decided to increase capacity in order to get into the tariff schedule.”

According to Alexander Lelikov, the company now has one mining farm. They transported equipment from the Minsk data center to a new 5 MW data center outside the city and expanded the fleet to 1,000 devices.

“We are now planning to record profits on the infrastructural development of the new facility,” says Alexander. “We plan to launch a second workshop at the new facility next year. It is still impossible to say for sure whether it will be focused on the mining of Bitcoin or other cryptocurrency. We do not rely entirely on halving and are not chasing BTC. We have an economy and infrastructure that we are developing to scale.”

Now Belarus is actively modernizing its energy system and reconstructing power grids. This year the second power unit of the Ostroshitsky NPP was put into operation. The electricity generation surplus will only grow.

At the end of 2023, the capacity of the Belarusian energy system was 12,680 MW. It takes about 8,500 MW to supply electricity to consumers. Moreover, the real load of the system is now estimated by power engineers themselves at 6,300 MW. That is, 2,200 MW can be used to connect new consumers, Belenergo representative Andrei Negodko said at the Criptobrige forum.

According to him, the equipment can be connected to three types of electrical networks: 10 kV, 110 kV, 330 kV. Most of the reserve capacity falls on 110-330 kV networks. Connecting to them is expensive and takes a lot of time due to the construction of step-down infrastructure, energy workers say.

There are now two large data centers operating in Belarus: a 100 MW data center in the Berezovsky district near the Belozerskaya State District Power Plant and a 15 MW farm on the territory of the Minsk Gear Plant. Both properties are owned by Chinese investors.

Risks of mining in Belarus

For individuals mining cryptocurrency in Belarus, there is always the possibility of losing income due to equipment downtime, market volatility, hacker attacks, scammers and device theft. Due to sanctions, a miner’s wallet with crypto assets may be blocked, and its owner may be excluded from the mining pool. There is a threat of changes in electricity tariffs, the introduction of taxes and tightening of legislation of the Republic of Belarus in 2025.

The HTP Supervisory Board may deny residence to legal entities if the company has an unrealistic business plan, has tax debts, and the organization has provided false information about itself or violated other rules of the Park. For violations, the HTP council may assess taxes, penalties and fines for the entire year, and cancel tax benefits.

A legal entity may be completely expelled for violating the rules of the Park. If a company receives income from activities not permitted for residents or subleases property, all this is equivalent to receiving non-core revenue. At the same time, residents are allowed to engage in other types of activities not related to cryptocurrencies, but subject to standard taxation procedures.

By losing HTP resident status, a legal entity will no longer be able to engage in industrial mining of crypto assets in Belarus.

Residents are required to transfer 1% of all income to the Hi-Tech Park.

Strengthening reporting and control

According to the HTP rules, mining companies can carry out transactions with cryptocurrencies only through five Belarusian crypto exchanges, which are also residents of the Park: Dzengi Com (formerly Currency), Bynex, Free2ex, FINSTORE and Whitebird.

Before starting to work with the exchange, the miner goes through KYC and AML procedures on the trading platform — provides information according to the list: about the authorized capital, business owners, financial statements, and so on.

When a miner places cryptocurrency on an exchange, he confirms to the site’s compliance control service that he was the one who mined the coins. Exchanges may request supporting documents — rental agreements for premises, receipts for the purchase of equipment, receipts for payment of electricity.

“Now the number of miners is not as large as it was when Bitcoin was at its peak price. Over time, mining becomes more and more difficult due to the increase in the number of people willing and their capacity, says Alexander Dulsky, head of client service at the Belarusian crypto platform Binex.. — The cryptocurrency market is now in anticipation, because halving is ahead. Altcoin holders are also slowing down active operations in anticipation of the bull run.”

Other risks

According to the HTP rules, companies cannot sell equipment purchased for mining within a year after placing it on their balance sheet.

Miners who have signed a preferential tariff agreement are required to consume the declared annual volume of electricity. Otherwise, the supplier has the right to recalculate consumption at a higher standard tariff, says First Deputy Minister of Antimonopoly Regulation and Trade of Belarus Ivan Vezhnovets.

There are few free production sites in the Republic of Belarus to accommodate large mining farms. Therefore, companies often have to rent land and build their own infrastructure to connect electricity.

Where is it more profitable to open a mining company?

Russia Belarus Pros The process of registering a legal entity — three days.

You do not need a special status to engage in mining.

Low electricity tariffs.

Possibility to use a 20% tax deduction when purchasing equipment and electricity for mining.

By accelerating equipment depreciation, you can take advantage of a 20% deduction from income taxes.

The cost of mining equipment is lower than in the Republic of Belarus due to its proximity to China.

Mining is legal and regulated by law.

The state is interested in developing the production of crypto assets.

Cryptocurrencies and transactions with them are not subject to taxes.

There are reserve capacities of the power system.

The cost of opening an LLC is 29 Belarusian rubles (about 808.7 Russian rubles).

Preferential electricity tariffs for mining companies.

The estimated construction period for a mining farm, taking into account the construction of 10 kV electrical networks, is one and a half to two years.

Low competition

Mius Mining is not regulated by law.

Cryptocurrency mining is not supported by the government.

The state fee for registering a legal entity is 4,000 Russian rubles.

Mining companies in some regions do not have enough electricity, network capacity is exhausted.

Building new power lines is long and expensive. Energy companies prioritize housing and communal services and industry, not miners.

Connection is delayed for months due to bureaucratic delays.

High competition.

The period for registering an LLC is five working days.

The company needs to obtain HTP resident status.

A foreign company needs to open a legal entity in the Republic of Belarus.

When joining the Park, the HTP Supervisory Board requires a business plan and information about the company.

The Supervisory Board may deprive a company of its HTP resident status for violating the rules.

A mining company can sell mined assets only on Belarusian crypto exchanges, where it and the cryptocurrencies it places undergo AML and KYS.

The company pays 1% of turnover to HTP.

Let's compare the profitability of mining in practice

Let's calculate the annual profitability for the Bitmain Antminer S19J PRO 100 TH/s miner for legal entities in Russia, Belarus and Kazakhstan based on data for now, the beginning of 2024. The model is quite efficient due to its performance of 100 Tx/s and power consumption of only 29.5 W per Tx/s.

Let's summarize all the information for calculations in a table

Country Miner price, $ Tariff

$/kW *h

Taxes Benefits Russia 1,329 0.05 (average tariff for the Russian Federation) Income 20% as a legal entity. 20% deduction from income tax.

20% deduction from VAT on equipment and electricity

Belarus 1,497 0.05 (tariff for miners) 1% income as a HTP resident —

The cost of electricity for industrial miners consuming from 15 MW per year in the Republic of Belarus and the Russian Federation is $0.05. At the same time, Belarusian miners, unlike their Russian colleagues, do not pay income tax of 20%. Instead, they pay 1% income tax as HTP residents.

Russian miners, thanks to tax optimization, can receive tax deductions from income tax for depreciation of equipment and VAT deductions from the cost of equipment and electricity. The costs of purchasing equipment in the Republic of Belarus fall entirely on the shoulders of Belarusian miners, without VAT benefits (and the price is higher than in the Russian Federation). There are no tax deductions.

Let's compare in practice the profit from mining in Russia and Belarus. Let's calculate the profit on the Bitmain Antminer S19J PRO 100 TH/s at the beginning of 2024.

The price of a unit of equipment is 120,000 Russian rubles ($1,329).

Hashrate — 100 TH/s.

Power — 2,950 W/h.

Cryptocurrency — BTC.

The average electricity tariff in the Russian Federation kWh is 4.9 rubles ($0.05).

To calculate the annual profitability of a farm of 10 devices, we use a mining calculator. Let's calculate the planned profitability based on the input parameters.

According to calculations, the planned profit is $16,439.36. Return on Investment ROI =123.70%. This means the investment has paid off.. In the first year, the profit was more than 23%.

Let's say Bitcoin doesn't rise after the halving

If in the first time after halving there is no growth in Bitcoin, as predicted by the head of the Binance exchange Changpeng Zhao, then from April 2024 the income from mining will decrease by half, to $10,274.63.

If for the first 4 months the ROI is 41.23%, then for the remaining 8 months the ROI will be (123.70%-41.23%)/2= 41.235%. As a result, the ROI will be 41.23.6+41.235= 82.47%

That is, in the first year we will be able to return only 82.47% of the investment.

In the second year there will be a profit of 82.47 + 61.85 = 144.32% in the amount of more than 44%.

Let's calculate income tax

Income tax for legal entities in the Russian Federation is 20% of profit. Let's say we decided to optimize taxation and registered miners as fixed assets (FPE). Thanks to tax optimization, we will write off most of the cost of miners in the first three years. Let's apply a maximum coefficient of 3.0. This will allow you to write off up to 20% of the cost of equipment and reduce income tax.

S (equipment cost) — $13,290;

Gross profit for 1 year – $16,439.36;

ROI for 3 years — 270%;

R (income tax rate) — 20%;

Depreciation period — 3 years;

Acceleration factor — 3.0.

Calculation:

Gross profit for three years = $35,883 (270% of $13,290).

NP1 (tax without depreciation):

$35,883 * 0.2 = $7,176.

Income tax without depreciation for three years was $7,176.

Depreciation = S / Term * K = 13,290 / 3 x 3 = $13,290.

Taxable income: $35,883 – $13,290 = $22,593.

NP2 (tax with depreciation): $22,593 * 0.2 = $4,518.

Equipment expenses + tax for three years with depreciation = $13,290 — $4,518 = $9,132.

As a result, due to the deduction of equipment depreciation expenses from income taxes, the cost of 10 miners over three years decreased from $13,290 to $9,132.

As a result, the state returned us $4,518.

It is important to remember: in order to use the tax deduction, you will have to comply with a number of conditions.

Let's calculate how much the cost of equipment will be reduced in three years due to the deduction of VAT 20%.

We purchased the equipment and put it on the balance sheet as an OS. This made it possible to deduct the incoming 20% VAT on purchased miners.

Cost of mining equipment with VAT 20% = $13,290.

Cost of mining equipment without VAT = $13,290 / 1.2 = $11,075.

VAT amount = $13,290 — $11,075 = $2,215.

We pay the supplier the full amount including VAT — $13,290. We put the miners on the company’s balance sheet as OS at a cost of $11,075 excluding VAT.

A VAT return is submitted to the tax office. At the same time, we have the right to deduct VAT in the amount of $2,215. This amount of VAT is returned to us from the budget. Thus, out of $13,290, we reimburse $2,215 VAT.

Let's summarize the obtained data in a table.

Expenses for three years, $ Income and savings, three years, $ VAT of equipment 2,215 Profit 35,883 Income tax 7,176 Deduction for depreciation 4,518 — — Deduction from VAT 2,215 Total 9,391 42,616

For three years of mining in the Russian Federation, the profit after taxes amounted to $33,225.

How profitable is it to mine in Belarus on an industrial scale, taking into account tax benefits?

Let's calculate the profit from Bitcoin mining in Belarus

For mining in the Republic of Belarus, we will assemble a farm of ten Bitmain Antminer S19J PRO 100 TH/s miners. This amount will likely provide a profit in the first year, provided the Bitcoin price rises. We will also increase electricity consumption — 250.82 MW per year at a preferential tariff for Belarusian miners — $0.05 kWh

The price of a unit of equipment is 4,752 Belarusian rubles ($1,497).

Hashrate — 100 TH/s.

Power — 2,950 W/h.

Cryptocurrency — BTC.

To calculate the annual profitability of the device, we use a mining calculator. Let's calculate the planned profitability based on the input parameters.

According to calculations, the planned profit is $15,500.71. Return on Investment ROI =110.96%. So the investment paid off. In the first year, subject to further growth of Bitcoin, the profit was about 10%.

Let's say Bitcoin doesn't rise after the halving

If Bitcoin growth does not take place during the first time after halving, then from April 2024, mining income will decrease by half, to $10,516.22.

If in the first 4 months the ROI is 39.6%.

Then for the remaining 8 months the ROI will be (110.96%-39.6%)/2= 35.68%.

As a result, the ROI will be 39.6% + 35.86% = 75.46%.

That is, in the first year we will be able to return only 75.46% of the investment. In the second year there will be a profit of 75.46 + 55.48 = 130.94% in the amount of more than 30%.

Let's calculate how much income tax we will pay as a HTP resident.

S (cost 10 units. equipment) — $14,970.

Gross profit for 1 year – $15,500.71.

ROI for 3 years — 210%.

R (income tax rate) — 1%.

Calculation: Gross profit for three years = $31,437 (210%*$14,970). Income tax: $31,437 *0.01= $314.37.

Expenses for 3 years, $ Income and savings 3 years, $ Income tax 314.37 Profit $31,437

For three years of mining in Belarus, the after-tax profit should be $31,222.

Having been mining Bitcoin in the Russian Federation for three years, we will earn a net profit of $33,225, in Belarus the profit is slightly lower — $31,222.

Summarize

Despite tax incentives for HTP residents, Bitcoin mining in Belarus is estimated to be slightly less profitable for large miners than in Russia. The reason is that Russian companies can claim a tax deduction of 20% VAT when purchasing equipment, while in Belarus there is no such mechanism.

“How will the rules of the game change after 2025?”

The Promminer company is preparing for the Bitcoin halving, setting up equipment for maximum performance, mastering the mining of new coins, optimizing energy costs and risks, monitoring innovations, and improving personnel skills, Promminer Sales Director Dmitry Kudinov told Bits.media. But the company is not yet considering Belarus for scaling.

“Looking at Belarus, our miners must take into account important aspects. Until 2025, there are no taxes on mining for individuals and legal entities — HTP residents — this is very profitable. Night rates look tempting for private miners. But it is important to look at the overall situation in the country. How will the rules of the game change by 2025? Will there be enough energy with the advent of new miners? Will a second nuclear power plant be built?

According to the Promminer top manager, Belarus can become attractive for the expansion of the Russian mining business only if current benefits are maintained and regulation becomes more predictable after 2025.

Conclusion

Russian miners should take a closer look at the Belarusian market, what is happening in the country with the regulation of cryptocurrencies and electricity tariffs. The analysis shows comparable profitability of mining in the Russian Federation and the Republic of Belarus. You should remember the responsibility of legal entities as HTP residents. In general, Belarus can become a profitable alternative, with a significant increase in electricity tariffs and taxation of cryptocurrencies plus transactions with them in Russia itself.