Venezuela’s ban on cryptocurrency mining has severely damaged the industry that President Nicolás Maduro once supported.
Back in March, the state regulators ordered a halt on mining cryptocurrencies after an investigation into a corruption scheme in which crypto wallets redirected payments owed to the state-run oil company Petróleos de Venezuela.
So far, around 80 people have been arrested in connection to the oil scandal, including former technology minister Hugbel Roa and Joselit Ramírez, who managed the crypto superintendence.
However, as the state’s halt on crypto mining approaches its third month, more and more miners could be forced to sell their rigs and shut down permanently.
This comes even as Maduro had pushed the use of crypto and specifically the Petro sovereign token, issued by the government, as a tool to bypass sanctions and as an alternative to the Venezuelan bolivar.
“It is unfortunate that after going through so much trouble to formalize and do things right, we are now in this situation,” Alexis Lugo, who’s been working in digital assets for seven years and now leads an educational crypto project called Criptoneros, told Bloomberg in an interview.
According to estimates from mining groups, approximately 75,000 units of mining equipment have been disconnected, the equivalent of an entire fleet of machines owned by a major publicly traded mining company such as Riot Platforms.
The report added that Venezuela’s intelligence police, known as Sebin, has been auditing miners, asking for confirmation that funds used to purchase equipment didn’t come from the oil corruption scheme.
However, no miners are known to have been detained or charged with a crime.
“The innocent are paying for the sins of the guilty,” said Juan Blanco, chief executive officer of BitData, a 10-person crypto miner in Caracas that’s also focused on crypto education.
Crypto Mining Industry Struggles Worldwide
Venezuela’s ban on crypto mining comes as miners from across the globe struggle with the plunge in Bitcoin (BTC) prices on top of higher electricity costs.
In December last year, Core Scientific, the largest public Bitcoin miner by computing power, filed for bankruptcy.
At the time, the company has attributed its bankruptcy to a $7 million unpaid debt from Celsius Network, a bankrupt cryptocurrency lending company, besides slumping crypto prices and rising energy costs for mining.
Aside from Core Scientific, other crypto mining firms are also struggling amid the market downturn.
Argo Blockchain, Iris Energy, and Greenidge Generation are among the more notable Bitcoin mining companies that are facing financial issues.
Meanwhile, some countries are taking a different approach, pushing for regulation instead of a ban.
Earlier this week, Russia‘s Ministry of Energy announced that it is pushing for the legalization of industrial crypto mining, and wants lawmakers to press ahead with a much-anticipated mining-related bill.
Likewise, the government of Kazakhstan has announced plans to introduce new crypto regulations to curb tax fraud and unlawful business operations.
One of the proposed regulations calls for government approval for secured digital assets issuers, while another would require miners to sell at least 75% of crypto earned via registered exchanges.
These new regulations are expected to reduce tax evasion and improve governance.
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