Russia-controlled “shadow territories” in the post-Soviet region have become BTC mining hotspots, generating funds to fuel Kremlin influence operations and acquire dual-use goods.
Investigative journalist Neil Barnett reveals how pro-Kremlin businessmen exploit seized territories in former Soviet republics, uncovering the schemes driving their enrichment.
According to Barnett, Russian businesses and security officials have transformed these regions into massive data centers. Cryptocurrencies mined in these regions finance various activities, including supporting separatist movements and destabilizing political systems in the EU and US.
Transnistria – The Epicenter of “Black Market Mining”
The breakaway region of Transnistria has emerged as a key hub for underground operations, particularly large-scale cryptocurrency mining. Free gas from Gazprom and exceptionally low electricity costs make this region especially attractive to crypto miners.
The scheme is both simple and efficient:
- Gas Debt: Transnistria does not pay for the gas it receives from Russia, making it essentially free. This setup supports the region’s inefficient industries and heavily subsidizes cryptocurrency mining.
- Energy Infrastructure: The Kuchurgan Power Plant (MGRES), powered by free gas, provides electricity to mining data centers.
- Supportive Legal Framework: The Transnistrian “government,” under Moscow’s influence, has not only legalized mining but also established some of the world’s lowest electricity tariffs, creating optimal conditions for miners.
- Russian Company Involvement: Russian companies, many linked to Gazprom, play a significant role in mining projects. This enables the Kremlin to generate additional income while circumventing international sanctions.
Kuchurgan Power Plant. Source: Trm.md
The leading player in Transnistria’s crypto mining industry is Goweb International Limited. Officially registered in London, the company has been inactive since 2020. However, unofficially, its operations continue in Russia through its staff. Goweb is heavily involved with offshore companies and banks tied to large-scale money laundering. For example, it worked with Latvia’s ABLV Bank to facilitate transfers for purchasing mining equipment. ABLV, notorious for its Kremlin ties, has repeatedly faced allegations of money laundering.
Offshore jurisdictions commonly hide the identities of beneficiaries and make tracking financial flows difficult. In Goweb’s case, its connections to Russian businessmen, including Nikita Morozov, suggest that the company is being used to launder illicitly acquired funds. Additionally, Russian millionaire Igor Chaika and his father, former Prosecutor General Yuri Chaika, have been linked to this scheme. Both maintain close ties to Tiraspol (the “capital” of unrecognized Transnistria) and former pro-Russian Moldovan President Igor Dodon.
Beyond Transnistria, other regions under Russian control, such as Donbas (partially controlled) and Abkhazia (fully controlled), have also become key hubs for illicit crypto mining.
Donbas: Crypto Mining on Occupied Territories
Donbas, once known as a coal-rich region powering heavy industry, has seen a dramatic transformation in recent years. With industrial production nearly at a standstill due to workforce shortages, surplus electricity from coal-fired power plants is now being diverted into cryptocurrency mining. Reports suggest that large-scale mining farms, allegedly guarded by Russian security forces, are operating within metallurgical plant facilities.
In 2018, Ukraine’s Security Service (SBU) disclosed that mining equipment brought in from Russia was being used to finance terrorist organizations of the self-proclaimed Donetsk People's Republic (DPR) and Luhansk People's Republic (LPR). The mined cryptocurrency was reportedly converted into fiat currency via Qiwi and Yandex.Money wallets and used to purchase arms and ammunition.
Today, cryptocurrency mining in Donbas has evolved into a full-scale industrial operation.
The Donetsk Metallurgical Plant has become a hub for illicit cryptocurrency mining. Source: GMK Center
At the St. Petersburg Economic Forum, the head of the so-called DPR, Mr. Pushilin, declared that Donbas is an “energy-surplus region, thanks to its power plants, coal reserves, and new opportunities.” He described cryptocurrency miners as “true revolutionaries” and argued that crypto mining in the region is “essential” for Russia’s survival under sanctions.
Russia’s Deputy Finance Minister, Ivan Chebeskov, was even more candid. At the same forum, he openly admitted that Russia relies on cryptocurrencies as an “alternative channel for international payments.”
Abkhazia: Stealing from Georgia, Delivering to Russia
Abkhazia, formerly part of Georgia until 1992, benefits from cheap electricity and a lack of energy-intensive industries. This advantage comes largely from the Enguri Hydropower Plant, located on the administrative border between Abkhazia and Svaneti.
Although the Enguri plant is officially owned by Georgia, the Georgian government has traditionally provided energy to Abkhazia at discounted rates on "humanitarian grounds." These low electricity costs made cryptocurrency mining an extremely profitable venture in the region. However, by 2023, mining activity in Abkhazia had declined, possibly due to the relocation of large-scale operations to the Donetsk region.
Corruption could also be playing a role. Bidzina Ivanishvili, the founder of Georgia’s ruling "Georgian Dream" party and a pro-Russian oligarch, reportedly derives significant income from cryptocurrency mining.
To facilitate such operations, Georgia has established "Free Industrial Zones" with special tax regimes, relaxed licensing requirements, and major data centers for processing information in cities like Tbilisi, Poti, and Kutaisi.
According to Transparency International Georgia, a non-governmental organization focused on exposing corruption among the country’s political elite, Bidzina Ivanishvili sold land near Tbilisi to the mining company BitFury for just 1 lari. BitFury, owned by Russian-Latvian businessman Valery Vavilov, is rumored to have ties to Ivanishvili, with unverified claims suggesting he holds shares in the company or may even be a co-owner.
To meet the energy demands of data centers owned (or partially owned) by Georgia’s “shadow ruler,” the government has restricted electricity supplies to Abkhazia, forcing a reduction—or at least the appearance of one—in cryptocurrency mining activity there. Recently, reports have surfaced that the Parliament of the unrecognized state is planning to outlaw mining entirely, introducing criminal penalties for those involved.
Despite these developments, it is highly likely that all digital coins mined using electricity from the Enguri Hydropower Plant ultimately find their way into Russian crypto wallets.
Enguri Hydropower Plant. Source: Netgazeti
Russia’s Shadow Economy
Barnett claims that Russia, China, and India are building a parallel financial system, where cryptocurrency plays a key role in bypassing sanctions and restrictions.
This system operates as a closed payment network, converting Russian rubles, Chinese yuan, and Indian rupees into BTC. By doing so, it sidesteps traditional banking channels and avoids oversight from Western financial regulators.
According to Bloomberg, Russia is actively exploring alternative payment methods with China. Facing sanctions, Russian authorities have officially approved the use of cryptocurrencies, particularly the stablecoin USDT, to import goods from China. Initially, this method was introduced for defense industry enterprises and companies sourcing dual-use goods, as they struggle the most with conventional payment systems. Likewise, China is said to use stablecoins to pay Russia for raw material imports.
These developments highlight how geopolitical conflicts and access to unregulated energy resources are helping Russia build a shadow economy driven by cryptocurrencies.
