Game Theory in Motion
The recent announcement by Russia’s sovereign wealth fund to construct Bitcoin mining and AI computing facilities for BRICS nations has sent shockwaves throughout the industry. Nico Smid, founder of Digital Mining Solutions, believes that this move may inspire other countries to tap into state-owned resources to mine Bitcoin.
"Game theory is now in motion," Smid explained in an interview with Cointelegraph. "Other countries will likely follow the likes of El Salvador, Bhutan, Ethiopia, the United Arab Emirates, and Russia in monetizing underutilized energy to mine Bitcoin."
BRICS Business Forum: A Catalyst for Change
In mid-October, during the BRICS Business Forum in Moscow, Russia’s sovereign wealth fund partnered with Russian data center operator BitRiver to construct Bitcoin mining and AI computing facilities for BRICS nations. This project has the potential to see the BRICS nations settle global trade in Bitcoin – an alternative to the basket of local currencies and gold-back currency ideas initially considered.
What is BRICS?
BRICS is a group of major emerging economies that initially comprised Brazil, Russia, India, China, and South Africa – but expanded in 2024 to include Egypt, Iran, Saudi Arabia, Ethiopia, and the United Arab Emirates. With a combined gross domestic product larger than the G7 nations – a rival economic alliance led by the United States, Japan, and Germany – BRICS has become a significant player in global trade.
The Crypto Industry’s Response
The news largely went under the radar as the crypto industry continues to "hyperventilate" over the upcoming United States election. VanEck’s Head of Digital Assets Matthew Sigel told CNBC on October 28, "There’s tremendous urgency outside of the US to find a way to circumvent the irresponsible fiscal policy that we’ve been running in the US."
State-Owned Resources: A New Frontier for Bitcoin Mining
Three countries – Argentina, Ethiopia, and the United Arab Emirates – are already leveraging state-owned resources to mine Bitcoin. Alen Makhmetov, a founder at Hashlabs Mining, believes that Russia’s Bitcoin mining and AI plans could be part of a broader attempt to gain a geopolitical edge.
"With limited IT infrastructure in these regions, Russia sees a chance to expand its influence," Makhmetov explained. "This aligns with its broader foreign policy of strengthening ties within BRICS as US support for these nations wanes."
The Impact on Bitcoin
Russia’s BRICS plan would also positively impact Bitcoin as a significant portion of the network’s hashrate is currently concentrated in the US, Smid said.
"It creates opportunities for older mining equipment to remain productive in regions with lower energy costs, where mining at the current location might otherwise be unprofitable," Smid added.
The Future of Bitcoin Mining in Russia
Russia is set to lift its Bitcoin mining ban on November 1 – but not without constraints. All Bitcoin miners will be required to register with Russia’s Federal Tax Registry and submit lists of machine models and wallet addresses, Makhmetov said.
However, the lifting of the Bitcoin mining ban may not be smooth sailing either, as Russia currently faces rising electricity costs and devaluation of its ruble, Makhmetov added.
"Russia is no longer a country with abundant, low-cost hydropower – electricity is becoming expensive due to a combination of excessive demand and the ruble devaluation," Makhmetov said.
Conclusion
The recent announcement by Russia’s sovereign wealth fund has sent shockwaves throughout the industry. As other countries consider tapping into state-owned resources to mine Bitcoin, it remains to be seen how this will impact the global economy. One thing is certain – the world of Bitcoin mining is about to get a lot more interesting.
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