Experts indicate that Bitcoin mining is currently the most profitable cryptocurrency activity in Serbia, a country well-suited for the development of this industry. Cryptocurrency mining is legal in Serbia, and business expenses, particularly electricity costs, are more favorable than in many European nations. However, most of the mining activity is conducted by individuals, leading to a lack of reliable data regarding the number of miners, their tax compliance and how they pay for the significant electricity they consume.
In the past, there were notable cases of electricity theft linked to cryptocurrency mining. For instance, an electrician from Elektroprenos BiH was caught connecting mining equipment directly to a substation, racking up a bill of €9,860. Similarly, in Serbia, €20,000 worth of electricity was reported to have been consumed for mining purposes at a memorial home.
Despite sensational stories about illegal activities making headlines, the general public remains largely unaware of the true nature of the cryptocurrency mining industry in Serbia, including its regulatory framework and profitability.
How mining works and its profitability
Cryptocurrency mining involves individuals using computers to solve complex mathematical problems, thus confirming and recording transactions on the blockchain. Miners are incentivized with cryptocurrency rewards based on market supply and demand.
Ivan Andrejević, co-founder of CTB Crypto & Consulting, explains that miners investing in high-quality equipment have the best chance of earning substantial returns. Typically, mining setups consist of “mining rigs,” or computers equipped with multiple graphics cards. Each rig is customized for the specific cryptocurrency being mined.
In Serbia, Bitcoin mining is particularly favored because miners perceive it as a secure and consistent revenue source. The use of ASIC devices in Bitcoin mining simplifies the process compared to equipment used for other cryptocurrencies.
Economic advantages of mining in Serbia
Stefan Pekić from the Pekić Law Office notes that, while equipment costs are lower in Serbia than in many European countries, miners also benefit from favorable regulations. The Law on Digital Property legitimizes this activity, allowing miners to secure affordable storage space for their equipment, especially in rural areas.
Electricity costs are another significant advantage. Serbia’s rates for commercial electricity are lower than the EU average. As of now, electricity in Serbia costs around €0.11 per kWh, while the EU commercial rate is approximately €0.20 per kWh.
Additionally, miners have the option to generate their electricity from renewable sources like solar power, although the initial investment required is substantial, making it more feasible for larger enterprises.
Challenges and Regulatory Ambiguities
Despite the favorable conditions, many uncertainties persist. There are only rough estimates suggesting that between 50,000 and 100,000 individuals engage in cryptocurrency mining in Serbia. Most miners operate as natural persons rather than registered businesses, complicating the tracking of tax compliance.
Pekić emphasizes that only households and small customers can access the lower, guaranteed electricity rates. If miners exceed certain consumption thresholds, they may find themselves paying significantly higher commercial rates.
The Electric Power Company of Serbia (EPS) encourages miners to request proper electricity connection conditions for their operations, allowing them to be treated as investors and pay commercial rates.
Future Prospects for Cryptocurrency Mining
The current regulatory environment appears to deter many businesses from entering the cryptocurrency mining sector, mainly due to insufficient state support and a lack of clarity regarding electricity needs and usage rights for miners.
However, interest from foreign companies looking to enter the Serbian market exists, as indicated by discussions with potential investors. Andrejević notes the growing trend of tokenization in various industries, including agriculture, and suggests that similar models could emerge in the mining sector.
As the cryptocurrency landscape evolves, Serbia may witness a shift towards more structured and regulated mining operations, fostering both local and foreign investment in this promising industry.
