SBI Holdings, Japan’s largest online brokerage firm, has halted its crypto mining operations in the Russian Federation. Amid growing uncertainty over the future of such investments due to the ongoing conflict in Ukraine and declining mining profits, the financial firm said it plans to sell its equipment and exit.
Japanese SBI brokers to pull out of Russian mining industry altogether
Access to low-cost power and suitable climate conditions made Russia an attractive destination for cryptocurrency miners when China cracked down on the industry in May 2021. However, sanctions imposed in response to Moscow’s decision to attack Ukraine this year have hurt bitcoin mining, among other Russian industries.
One of the largest mining data center operators with a significant presence in Russia, Switzerland-based Bitriver, was targeted by the US Treasury Department this spring. Subsequently, the U.S. company Compass Mining attempted to liquidate $30 million of mining hardware installed in Siberia to avoid Western sanctions.
Russia’s invasion of Ukraine has created uncertainty about the prospects for mining operations in the energy-rich region, while a slump in the crypto market has made it less profitable to mint digital currencies, a representative of SBI, Japan’s largest online brokerage, told Bloomberg. Chief Financial Officer Hideyuki Katsuji said the company plans to sell equipment and exit Russia.
SBI entered the digital assets space earlier than other Japanese financial firms, but negative developments this year led to a 9.7 billion yen ($72 million) pre-tax loss from its crypto business in the second quarter and the group also posted a net loss of 2.4 billion yen (over $15.8 million), the first in a decade This was the first time that this had happened.
Japanese brokerage firms suspended their mining activities in Siberia shortly after war broke out in Ukraine, but have not yet decided when they will complete their withdrawal from Siberia, Katsuchi noted. The financial firm has no other crypto business in Russia, the executive noted, but intends to continue operating its Moscow-based commercial banking arm, SBI Bank. The move comes after U.S. diplomats reportedly asked Tokyo authorities in July to pressure Japanese crypto exchanges and miners to cut ties with Russia.
In April, the International Monetary Fund (IMF) warned in a report that crypto mining could offer Russia and other sanctioned countries, such as Iran, a way to circumvent economic and financial restrictions imposed by the US and its allies. These countries could use their energy resources to power mining facilities and generate revenue from cryptocurrency extraction and transaction fees.
According to a recent study, electricity consumption in the Russian crypto mining sector has been constantly rising over the past few years, with a nearly 20-fold increase in the five years since 2017. Offering the lowest electricity rates in the country, Irkutsk in Siberia is one of the most attractive regions for miners, along with the capital Moscow, which has access to well-developed energy and other infrastructure.
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