Russia: growing interest in mining and international payments via bitcoin

There is increasing interest in bitcoin in Russia. Bitcoin mining is considered serious industrial activity and now represents 2% of Russian energy consumption. The sector will soon be regulated, but in a fairly lenient way. Meanwhile, the use of bitcoin in high-level international payments is “actively discussed.”

For a long time, Russia had nothing to do with bitcoin. Last year, the Russian central bank even pushed for a total ban, but Putin put a stop to that. Since the Russian invasion of Ukraine, sentiment seems to have turned and the Russian government is increasingly open to bitcoin.

Recognition

The Russian mining sector has now grown into an industry that accounts for 2% of Russia’s energy consumption, Deputy Minister of Trade and Industry Vasily Shpak told Interfax. ?ǣThat is more than the energy consumption of the agricultural sector ,?ǥ he said, ?ǣWe cannot fail to recognize mining in this sense as an industrial activity or industry.?ǥ?? ??

About 4.66% of the Bitcoin network’s total hashrate currently comes from Russia. This puts Russia in fourth place in the ranking of most popular countries among bitcoin miners.

Mild regulation

However, Bitcoin mining in Russia is in a kind of “grey zone,” Shpak argued. It’s not banned, but it’s not regulated either. As a result, the sector is not burdened, but it also creates uncertainties for the business community. That is why clear regulations are needed, he says.

Russia has been working on regulation for some time. Looks like it’s going to be a pretty mild strain. Initially, the focus was on a registration obligation for mining companies and exemption from taxes in the first year. Last week, however, the bill was amended and both were deleted. A simple registration as an independent entrepreneur now seems sufficient

Sanctions

The sanctions imposed on Russia probably play a role. Russia is one of the world’s largest energy suppliers, but sanctions make exports more difficult. The local energy consumption of Russian bitcoin miners is therefore probably welcome. Moreover, regulation of the sector also generates additional tax revenue.

In addition, Bitcoin is interesting for Russia as a global and decentralized payment network. Most Russian banks have been banned from the SWIFT network due to the sanctions, making international bank transfers to many countries almost impossible. Many Russian bank balances abroad were also frozen.

However, on the decentralized Bitcoin network, there is no central authority. It is therefore not possible to block transactions or confiscate funds. There are therefore concerns that Russia can circumvent the sanctions with the help of bitcoin.

For example, the IMF recently pointed out that Russian energy stocks could possibly be converted to bitcoins through mining. At the same time, the US imposed sanctions on mining companies operating in Russia for the first time.

‘Actively discussed’

Russia now appears to be exploring the possibilities, Reuters reported. ?ǣThe idea of using digital currencies in international money transfer transactions is being actively discussed,?ǥ said Ivan Chebeskov, head of the Finance Ministry’s financial policy department. He specifically referred to reducing the impact of Western sanctions

Chairman of the Energy Committee Pavel Zavalny previously stated that ‘friendly countries’ could possibly use bitcoin to pay for energy from Russia.

The Russian central bank also seems to have come around. ?ǣIn principle, we have no objection to the use of cryptocurrencies in international transactions ,?ǥ said central bank deputy governor Ksenia Yudaeva earlier this week. She did, however, emphasize concerns about the use of cryptocurrencies within the country itself

(Not suitable?

However, the question is whether bitcoin can be used to circumvent the sanctions. According to the EU, US and G7 and various experts, the risk is small, partly because of the customer checks of bitcoin companies required by law. There would also be insufficient liquidity for the size of the amounts with which Russia trades.

Nevertheless, there are more and more potential Russian trading partners who are doing ‘something’ with bitcoin. For example, Iran, which is also subject to sanctions, is working on a system to conduct international trade using bitcoin. Venezuela – another sanctioned country – also took steps to this end and has already imported goods from Iran and Turkey using bitcoin.

In addition, countries such as El Salvador and the Central African Republic have recognized bitcoin as legal tender, making the threshold for international trade based on bitcoin low.

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