The energy crisis, which had profound effects in Europe and the Balkans due to Russia’s occupation of Ukraine, caused Kosovo to not be able to import enough energy due to high energy prices. Regular power cuts were implemented throughout the country. The KEDS energy distribution company, which is active in the country, publicly announced that after every six hours of electricity distribution, there will be a two-hour power outage.[1]
Since coal is the only energy source that can be used adequately in Kosovo, energy production activity in the coal plant has been increased. Kosovo has the world’s fifth largest lignite reserves, estimated at around 14 billion tons.[2] In the country where 1.8 million people live, the average price for imported unit electricity in 2021 increased by about 40% compared to the previous year. In the first half of 2022, the situation was dire as almost half of Kosovo’s coal plants underwent regular pre-winter maintenance. About two-thirds of the electricity needed by the country had been produced based on coal. The increase in coal-based production capacity has caused air pollution.
In August 2022, the Kosovo Parliament declared a sixty-day state of emergency that allowed the government to take swift and drastic measures against power outages. Starting from August, the country has been experiencing regular power cuts seen in December 2021. In this process, the separation of the Serbian minority in Kosovo with the government on the use of electricity increased the tension in relations with Serbia. Later, with the energy supplied from Albania, the electricity crisis was partially taken under control.
Four regions in Northern Kosovo (North Mitrovica, Zvecan, Zubin Potok and Leposavic) have not paid Kosovo for electricity since 1999. This energy issue has also been on the agenda during the Kosovo-Serbia normalization process, which developed under the mediation of the European Union (EU). As a matter of fact, in 2015, the ground was prepared for a Belgrade-based energy company to provide electricity transmission to four regions. Then, since Serbia did not recognize Kosovo, the relevant company was not registered in the Kosovo registry and then electricity transmission was stopped. In the following process, the Kosovar KOSTT company became the energy supplying company to these four regions. KOSTT has been a part of ENTSO-E, which forms the joint energy bloc with Albania since December 2020.
KOSTT, the electricity transmission network operator of Kosovo, has announced to the public that it will not provide free electricity transmission to four regions where Serbs are concentrated, since a significant majority of electricity consumers consume electricity, in the regions where Serbs are densely populated, but do not pay for it.[3]
In the ongoing process, Russia’s reduction in energy supply and Kosovo’s energy imports at much higher prices have developed the government’s reflex to intervene in activities that consume electricity, except for compulsory transactions within the country. Ultimately, in December 2021, a sixty-day state of emergency was declared, allowing the government to allocate more funds to energy imports, electricity cuts and drastic measures.
Crypto asset miners in Kosovo faced government intervention in the country’s energy crisis. Kosovo Economy Minister Artane Rizvanolli announced the government decision on 24 December 2021 to restrict electricity supply in the country. With the step taken by Rizvanolli on January 4, 2022, crypto-asset mining in the country was banned as part of the extraordinary measures taken due to electricity shortages.
There are serious doubts about the legal basis of the ban on crypto asset mining in Kosovo. Because, although the extraordinary measures taken by the government impose limitations on electricity generation, they do not contain a regulation regarding the inability to use electricity consumption for crypto-asset mining. A week after Kosovo banned crypto asset mining, the Kosovo Police announced that seventy crypto asset mining devices were seized at two different locations, mainly in the Southern Mitrovica and Podojeve regions. However, no arrests were made in these operations.
Chairman of the Economic Board of the Kosovo Parliament, Ferat Shala, stated that most of the activities related to crypto assets in the country take place in the northern part of Kosovo in Serbian densely populated areas. Shala also stated that crypto-asset mining, which is associated with energy costs in the north, has accelerated the work on crypto-asset regulation in the country. Again, according to Shala, with the regulation, everyone serving in the relevant sector will know that official institutions monitor and control the activities and will be subject to the relevant laws.
According to the information provided by the Balkan Investigative Journalism Network (BIRN), many houses and garages have been rented to mine crypto assets due to the free electricity service that has been used in northern Kosovo for 22 years.[4] According to Reuters, an anonymous crypto-asset mining person in the north of Kosovo obtained 2400 euros of crypto assets for 170 euros of electricity paid to engage in crypto-asset mining activity.[5] Also, according to Reuters, crypto-assets miners in northern Kosovo are usually Serbs who live in the region, not recognizing Kosovo as a state and refusing to pay for electricity.
Crypto asset miners in northern Kosovo may have been subsidized by around 40 million euros from 2018-2021, thanks to the transmission of electricity with some form of government subsidy.[6] This business has become very attractive and profitable for crypto-asset mining people in Kosovo, especially as the “transaction difficulty” in the blockchains of crypto assets mined due to Chinese interventions in crypto-asset mining has decreased.
Undoubtedly, due to rising energy prices in the world and increasing crypto asset regulations, areas that are still gray in this regard, such as the north of Kosovo, will remain attractive to crypto asset miners, even if it is illegal. In particular, the states that are subject to severe financial isolation, such as Russia, may support activities in such gray areas for distributed data retention networks and require that the registers of “permissionless” blockchains that they can use be kept by miners in the relevant gray areas. In other words, keeping crypto-asset mining or “validating” active in gray zones around the world will benefit financially isolated states. However, due to the shallow liquidity of crypto asset markets, serious financial benefits will not be obtained by using crypto assets.
In short, Kosovo has been adversely affected by energy shortages and rising prices, which have increased significantly because of the political and financial polarizations in the world with the Russian invasion of Ukraine. Due to the special political situation of Kosovo, people living in the four provinces in the north of the country where Serbs are concentrated have not de facto paid electricity charges for years, although they consume electricity. However, due to the serious electrical energy problem in the country in 2021-2022, the Kosovo Government has been given extraordinary powers regarding electrical energy. In Kosovo, energy production based on lignite coal has been accelerated, based on the country’s own resources. Again, due to the current electricity shortage, regular power cuts were implemented in the country. In addition to all these, crypto-asset mining activities using free or very cheap electricity are prohibited in the north of the country. The devices of many crypto-asset miners were confiscated.
As a result, the developments experienced accelerated the crypto-asset regulation studies in the country. Although Kosovo has banned crypto asset mining in the socially conflicted northern regions, this activity will somehow continue. Because crypto-asset mining activities in geographies that can be defined as “grey zone” allow other sovereign states in the world to continue to keep their books on public blockchains.
[1] Rob Davies, “Kosovo Stops Import of Electricity and Begins Energy Rationing”, The Guardian, https://www.theguardian.com/world/2022/aug/15/kosovo-stops-import-of-electricity-and-begins-energy-rationing, (Date of Accession: 15.09.2022).
[2] “Kosovo Power Production to Remain Heavily Dependent on Coal”, Balkan Green Energy News, https://balkangreenenergynews.com/kosovo-power-production-to-remain-heavily-dependent-on-coal/#:~:text=Kosovo*%20has%20coal%20reserves%20estimated,then%20the%20government%20has%20offered, (Date of Accession: 12.09.2022).
[3] Alice Taylor, “Kosovo Continues Cracdown on Crypto”, Euractiv, https://www.euractiv.com/section/politics/short_news/kosovo-continues-crackdown-on-crypto/, (Date of Accession: 15.09.2022).
[4] Perparim Isufi, “Kosovo Police Seize Crypto-Mining Equipment After Govt Ban”, BIRN, https://balkaninsight.com/2022/01/07/kosovo-police-seize-crypto-mining-equipment-after-govt-ban/, (Date of Accession: 12.09.2022).
[5] “Kosovo Bans Cryptocurrency Mining to Save Electricity”, Reuters, https://www.reuters.com/markets/commodities/kosovo-bans-cryptocurrency-mining-save-electricity-2022-01-04/, (Date of Accession: 12.09.2022).
[6] Adelina Ahmeti-Kreshnik Gashi, “In North Kosovo, Mining for Bitcoin on ‘Free’ Electricity”, Balkan Insight, https://balkaninsight.com/2021/05/12/in-north-kosovo-mining-for-bitcoin-on-free-electricity/, (Date of Accession: 12.09.2022).
