Crypto Commitment Grows: Kremlin Allows Allied States to Pay for Gas in Bitcoin – Is Russia on the Way to Becoming a Crypto State? | news

Russia wants to establish Bitcoin as a means of payment for friendly countries
Moscow has long been recognized as a global center for crypto money laundering
Possible Russian Goal: Increase Bitcoin Mining In Its Own Country

For a long time, Putin was considered a critic of Bitcoin, Ether and Co. But since the start of this year, he has shown himself to be more and more crypto-friendly. Possible reasons: On the one hand, the damage to the US dollar, which it does not like, and on the other hand, the easing of Western sanctions against Russia, for which the Kremlin wants to strengthen the position of digital currencies as an alternative decentralized currency. But what exactly is Russia’s crypto commitment?

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Kremlin likely to allow Bitcoin gas payments to allied states

On March 24, the head of the Russian Energy Committee, Pavel Zavalny, announced that in the future Russia will accept bitcoin for payments from “friendly” states, as well as rubles and local currencies: ” We have been offering China for a long time to add rubles and yuan to the national currencies of Settle, with Turkey it will be the pound and the ruble. Currencies can be different, this is common practice. You can also exchange bitcoins,” said Zavalny, quoted by the BBC.

The Kremlin apparently intends to quickly integrate digital currencies into Russian payment transactions, probably also to weaken the hard currencies of the US dollar and the euro. But David Broadstock, an analyst at the Energy Studies Institute in Singapore, considers Russia’s permission to pay gas bills with highly volatile cryptocurrencies to be very bold: “Accepting Bitcoin as a means of payment – compared to currencies traditional – involves much more risk in the trade brings natural gas.” Another problem: China declared all crypto transactions illegal last year; Also in Turkey, another “friendly” state of Russia, cryptocurrencies are prohibited. So, can Russia really use bitcoins to mitigate the effects of Western sanctions? What is the truth behind the assumption that Russia will become a crypto state?

No direct evidence – but plenty of signs of Russia’s crypto activities

The big data service provider “Chainanalysis” has not yet been able to collect solid evidence that Putin’s wealthy profiteers or the Russian state are circumventing sanctions using large cryptocurrency packages. And yet, there is plenty to suggest that Russia has increased its exposure to crypto since the fateful invasion of Ukraine on February 24. The market capitalization of so-called “privacy coins”, where the identity of the owners cannot be verified, has increased, according to information from “BTC Echo”. These include, for example, the cryptocurrencies Monero, ZCash and Mina. However, these have too low a market capitalization to cover crypto activities from Russia. In addition, “Chainanalysis” was able to prove the selective activities of Russian crypto accounts – especially immediately after the invasion, when ruble payments in cryptocurrencies soared up to 900% for a short time. Although “Chainanalysis” sees behind it mainly small investors who want to protect themselves against the fall of the ruble. But “BTC Echo” also claims to have discovered that Russian “whales”, i.e. large crypto investors, transferred assets worth US$62 million to “dodgy crypto exchanges”.

Moscow has long been seen as a haven for cybercriminals

Russia is also apparently an international center for crypto money laundering. For years, Moscow, specifically the skyscraper Federation Tower (Russian: Federazija) in the Russian capital’s financial district, has been considered a major trading center for Bitcoin money laundering. There, cybercriminals can launder financial assets that have been earned through illegal activities and thus disguise their origin. It is therefore not surprising that Germany confiscated 543 Bitcoins worth more than US$25 million during the successful shutdown of the Russian dark web “Hydra Market”. The problem with crypto money laundering: This is only possible in small installments, larger transactions would be immediately noticeable. “The larger the amounts, the less anonymous transactions are possible. This is a desired result of the regulations of recent years”, explains Philipp Sandner, head of the blockchain center at the Frankfurt School of Finance, at the “Tagesschau”. According to BTC Echo, Russia can only launder $30 million a day because of this – a tiny fraction of Russia’s GDP, which was around $1.48 trillion in 2019.

Russia is likely to be increasingly involved in bitcoin mining

Own bitcoin mining will be much more important for Russia. Iran, which circumvents Western sanctions by generating bitcoin, is likely to serve as a dubious example. According to data from the “Cambridge Bitcoin Electricity Consumption Index”, the hash rate in Russia is already the third in the world. Only the United States and Kazakhstan generate more bitcoins. But Russia seems to be increasing its share: according to “BTC Echo”, Russian services have received significantly more cryptocurrencies from mining pools since the beginning of 2022. It can therefore be assumed that the Russian state is already promoting bitcoin mining or will do so in the near future. Then the criminal machinations around Bitcoin, often denounced as a “rogue currency”, would take on a new dimension. It is doubtful that Putin will achieve his goal of weakening the US dollar. But one thing is certain: such a development would further weaken the already hard-hit ruble.

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