What made Kosovo ban crypto mining?
An energy crisis in the country has been compounded by a booming industry in crypto mining. Not everyone is convinced that the measure will resolve Kosovo's energy crises.
Kosovo has sought to address the country’s growing energy crisis by instituting an immediate ban on crypto mining.
The country has struggled to produce enough energy in recent weeks to meet demand after a power station went offline in December, forcing the government to import more than 40 percent of its energy.
Such is the energy crunch facing the country that a 60-day state of emergency has been declared by the government.
As energy prices have soared in Europe, Kosovo has had to implement rolling blackouts to manage the country’s energy supply.
The role crypto mining plays in Kosovo
When mining cryptocurrencies like Bitcoin, computers – also called “mining machines” – are connected to the internet to verify transactions between cryptocurrency users around the world.
Owners of the machines are then rewarded with newly generated currency if they successfully solve complex mathematical equations which are validated by peers on the network. The rewards are potentially very lucrative. The downside is that enormous amounts of energy is consumed in the process.
In recent years, Kosovo has become somewhat of a hub for crypto mining, particularly the north of the country, which is Serb dominated and has refused to recognise the central government’s authority.
For the last 22 years, residents in the north of Kosovo paid little to nothing for electricity owing to the difficulty central authorities have had to integrate the region into the rest of the republic. That made it hugely attractive for those wanting to get rich quickly.
One activist in Kosovo who wishes to remain anonymous and is familiar with the government’s decision-making said that “we are in the middle of an energy crisis, so the ban makes practical sense.”
The new directive, however, will also seek to address chronic theft.
“Serbs in north Kosovo have been using massive amounts of energy to mine crypto coins, so the ban is also meant to address that,” they added, speaking to TRT World.
Dr Shyqyri Haxha from Royal Holloway University in London and a researcher in the Department of Electronic Engineering has mixed feelings about the approach taken by the Kosovo government.
“In terms of green energy, this might be a positive move, the energy consumption is enormous globally and outsized in Kosovo, relative to the country’s general consumption. So the Kosovo government probably had little choice but to do this,” says Haxha about his native country.
Haxha, who has been following the development of the crypto mining industry in Kosovo, says that it “doesn’t grow the economy.”
“In North Kosovo where the government exercises limited control and where it is said most of the crypto mining happens, the government has spent millions subsidising the electricity there,” says Haxha speaking to TRT World.
“This is a new government in Kosovo, and unfortunately, it doesn’t have too much expertise. It has been unprepared regarding the energy crises. To ban something is very easy – it’s important to know what to do next,” adds Hoxha.
Many in Kosovo are asking the same question.
What has the reaction been?
Following the announcement, the Kosovo government said it would use the intelligence services and the country’s police force to enforce the new rules.
Some argued that the government should enforce the law regarding illegal consumption of energy rather than seeking to ban crypto mining which is a legal activity.
“The government can’t ban an activity which is neither defined or regulated properly by law,” said one critic following the government’s announcement before adding that the move was ultimately a “silly PR stunt.”
Others defended the government in light of the country’s energy crises.
“On the context of the energy crisis in #Kosovo, banning the energy-consuming Bitcoin production was not only necessary but also a matter of course. How can one cut off the power supply to families out of the emergency a. allow the Bitcoins-prod, whether they pay the bill or not?” said one online user.