Just before the new year, residents of the remote mountainous region of Svaneti in Georgia gathered in a church to take a solemn oath on an icon of St. George: that they would not mine cryptocurrencies.
“It is unfortunate that we have had to resort to this extreme measure, but we have been left with no other option,” said a local. RFE/RL following the ceremony. It was a desperate attempt to deal with what has become an intractable problem: chronic power shortages in Svaneti due to the unscrupulous use of power-hungry computers that mine cryptocurrencies.
A few days earlier, the electricity company Energo Pro warned that the situation was “unsustainable”. Overuse had led to a series of accidents on the transmission lines that feed power into Svaneti, forcing companies to send helicopter crews to the high-altitude region in harsh winter conditions to repair them.
“No infrastructure can handle the kind of stress we are seeing there,” company director Mikheil Botsvadze wrote in a Facebook post.
Svaneti is better known for its towering snow-capped peaks, quaint stone-carved villages and strict traditional code of honour. However, increasingly, it is also known for the production of cryptocurrencies.
Some residents have taken advantage of a government program that provides free electricity to mountainous regions, in order to keep remote communities alive, and use the subsidized energy to produce virtual money in their medieval towers.
Georgia has become a unlikely global cryptocurrency hotspot, with prospectors attracted by the country's laissez-faire business environment and the cheap electricity needed for the energy-hungry process of "mining" the virtual money. Svaneti, with its free electricity for households and discounts for businesses, is a particularly attractive base for industry.
While that has allowed some in Svaneti to make a mint in the virtual economy, it has meant many others in the resource-poor region suffer from the resulting power outages. The region has no natural gas supply, which means that electricity (along with wood) is used for heating in winter. from Svaneti another new economic hope — tourism — particularly suffers from frequent power outages, which affect hotels, restaurants and ski lifts.
Svaneti's cryptocurrency frenzy peaked in 2019, when the power company and police were forced to go door-to-door to pull the plug on consumers who had engaged in cryptocurrency mining. Energo Pro said it then took around 5 million lari ($1.6 million) worth of mining hardware offline.
But the miners were not discouraged, and last year the region's electricity consumption returned to 2019 levels, the company said. The regional capital of Mestia and nearby cities consume almost four times more energy than the seven megawatt hours they are expected to consume.
Mountain dwellers aren't the only Georgians using electricity subsidies for cryptocurrency: monasteries have also become unlikely outposts of virtual mining. In a landfill last year security services surveillance files, one revelation was the extent to which the clergy had become involved in the cryptocurrency business.
“Since 2017, the bishop of the Vani-Baghdati diocese, Anton Gulukhia, owns up to 50 units of cryptocurrency production hardware,” read a leaked file cited by Georgian media. "He has so-called bitcoin mines stationed at his bishop's residence." The brief says that since 2017, the residence's electricity consumption has almost tripled each year due to crypto mining.
The bishop did not repent. "Yes I have them [computers used to mine virtual currency], then God bless you; if not, may God give them to me,” he said. He said the Mtavari Arkhi television network. "Is it a crime to have them?"
While few in Georgia dare stand up to the powerful Orthodox Church, residents of Svaneti are an easier target. Energo Pro and the authorities have threatened to take action against Svaneti miners and also to remove electricity subsidies from the region. "It is absurd to believe that the population has to have free electricity," the company said in a statement posted on its Facebook page.
Energy regulators echoed the statement. "We have to understand that if we don't start paying for electricity, we're going to continue to have blackouts and accidents that take time to fix," David Narmania, director of the Georgia National Power and Water Supply Regulatory Commission, told reporters. "All this is a problem for tourism and a discomfort for the population."
However, some energy experts criticized the authorities and the company for blaming Svans and argued that they should continue to receive free electricity for domestic use. The residents of Svaneti deserve compensation, among other things, for the many hydroelectric plants built in the region that produce electricity for the entire country, Davit Chipashvili, an expert at the Green Alternative environmental think tank, told the local news site Mtis Ambebi.
The authorities and Energo Pro are the ones with the responsibility to differentiate households from commercial users, which they could do by setting quotas, Chipashvili argued. "The government has done nothing to fix this," he said.
This article was originally published on Eurasianet.org
