Russia’s Crypto Factory fund: A low-cost energy play in mining

Russia is staking a bold claim aimed toward a low-cost energy play on Bitcoin miners with the launch of the “Crypto Factory,” the nation’s first closed-end mutual investment fund (CEF) dedicated to block reward mining.

Leveraging Russia’s abundant natural gas resources, this innovative fund offers qualified investors a low-opex model targeting 49% annual returns, provided BTC prices hold above $35,000. For publicly traded miners like MARA Holdings (NASDAQ: MARA), Riot Platforms (NASDAQ: RIOT), and CleanSpark (NASDAQ: CLSK), Russia’s move signals a compelling case study in harnessing cheap energy to drive hash rate growth, but it also underscores the competitive pressures of a post-halving market.

As global miners grapple with rising costs and network difficulty, the Crypto Factory’s gas-powered strategy could reshape capex and opex dynamics, though its exclusivity and market risks temper its broader impact.

The Crypto Factory fund, launched by Penza-based Power Systems in collaboration with Finam Management, is a strategic bid to capitalize on Russia’s energy surplus. By deploying natural gas-powered mining rigs, the fund mines BTC and sells the proceeds to generate regular payouts for investors, leveraging power costs as low as 2.5 cents per kWh in gas-rich regions like Siberia.

This is a stark contrast to United States miners, who face mining costs exceeding $70,000 per BTC due to rising energy prices and a network difficulty of 126.4 trillion. The fund’s low-opex model mirrors strategies employed by MARA Holdings, which achieved 23 joules per terahash (J/TH) efficiency in Q1 2025 while holding 49,179 BTC in reserves, balancing HODL with selective sales to fund fleet upgrades. CleanSpark, targeting 32 EH/s (exahashes per second) by year-end, has similarly prioritized low-cost power to maintain margins, making Russia’s approach a point of interest.

The fund’s reliance on natural gas aligns with industry trends toward sustainable energy mixes, reducing environmental scrutiny while slashing costs. Russia’s vast gas reserves enable sub-20 J/TH efficiency, comparable to Bitmain’s Antminer S21 Pro, allowing the fund to compete in a post-halving environment where block rewards are 3.125 Bitcoin.

For Riot Platforms, which secures sub-4-cent-per-kWh power contracts, the Crypto Factory’s model offers a blueprint for leveraging regional energy advantages. However, the fund’s exclusivity to qualified investors—typically high-net-worth individuals or institutions—limits its scale, positioning it as a niche play rather than a market disruptor. With Russia’s hash rate share at 5–10% globally, compared to the U.S.’s 31.6%, the fund’s immediate impact on block reward competition is modest but noteworthy.

Russia’s fund exemplifies this principle, offering a hedge against the $50 million daily miner revenues reported industry-wide.

Yet, the fund faces significant challenges. Scaling gas-powered mining requires substantial capex for infrastructure, including rig procurement and grid integration, in a country where regulatory uncertainty looms. Russia’s simultaneous crackdown on illegal mining, with 70% of miners unregistered despite November 2024 laws, highlights the risks of operating in a volatile policy environment. Proposed fines of 2 million rubles ($25,456) and crypto confiscation could deter investment, pushing miners to jurisdictions like Kazakhstan.

Hut 8 (NASDAQ: HUT), with sub-3-cent-per-kWh power costs in Canada, benefits from regulatory clarity, underscoring Russia’s need for stability to attract broader capital. Additionally, the fund’s reliance on BTC price stability introduces risk, as a dip below $35,000 could erode returns, forcing operators to adjust the hash rate or cut payouts.

For global miners, the Crypto Factory offers lessons in energy-driven innovation. Its gas-powered model could inspire U.S. firms to explore flared methane or biogas, as MARA has done with landfill energy, to reduce opex. However, Russia’s modest hash rate share limits its threat to U.S. dominance, where miners like CleanSpark leverage modular infrastructure to scale rapidly.

The fund’s success could elevate Russia’s role in global mining, but without broader access or regulatory reform, its impact remains constrained. As miners navigate a hyper-competitive market, Russia’s low-cost energy play underscores the critical interplay of power, policy, and profitability.

In conclusion, Russia’s Crypto Factory fund represents a strategic push to harness natural gas for BTC mining, offering a low-opex model for qualified investors. While its targeted 49% returns highlight Russia’s energy advantage, exclusivity and regulatory risks temper its influence. For publicly traded miners, the fund serves as a case study in optimizing energy costs, but global hash rate competition demands agility and compliance to sustain growth in a post-halving landscape.

Watch: Power, Protocol, and Protection with Mitch Burcham