The country may lose serious investments and talented entrepreneurs
The issuance, mining and circulation of cryptocurrencies carry risks for the Russian economy and financial stability. This was indicated by the regulator in the report “Cryptocurrencies: Trends, Risks, Measures”, released on January 20. Experts told MK about what goals the regulator is pursuing by introducing such a strict ban, and whether the authorities will seriously take on power mining this year.
So far, mining activity in Russia is not regulated in any way, and the volumes there are significant. According to the Cambridge University Center for Alternative Finance, in August 2021, Russia became the third country in the world for bitcoin mining. The August share of the Russian Federation in the total computing power of Russian miners is 11.23%. The first place in this rating belongs to the USA with a share of 35.4%, which is quite expected. But the second position in 2021 was taken by Kazakhstan with a share of 18.1%, where mining farms moved after the ban on crypto mining by the People’s Bank of China. China is now the largest country to outlaw all transactions with cryptocurrencies. However, other influential international financial organizations are also looking towards tightening regulation of this market.
So, on January 19, the Deputy Chairman of the European Securities and Markets Authority (ESMA), Eric Theden, demanded to ban mining in the EU based on the Proof-of-Work method. This is the name of an algorithm that involves performing complex mathematical calculations to maintain the operation of the blockchain and perform transactions that are handled by powerful computers of cryptocurrency miners. It is argued that this method causes significant harm to the environment due to its energy consumption. The European regulator is concerned about the growing share of renewable energy in mining power consumption.
There are also opposite examples. For example, in September 2021, in El Salvador, the authorities passed a law that gave bitcoin the official status of a means of payment.
Experts interviewed by MK consider a complete ban, which the Bank of Russia insists on, an excessive step and draw attention to the ambiguity of the positions of the authorities themselves.
Igor Zakharov, founder of the DBX digital ecosystem:
“The financial system can suffer greatly due to the withdrawal of the cryptocurrency business into the shadows, the lack of the possibility of obtaining taxes from operations that were regulated before. Under the influence of prohibitions, there will be an outflow of qualified personnel abroad. This will especially apply to miners, because due to the high cost of equipment, the way out of a difficult situation for them is to sell all the equipment for the minimum cost and move to work in another, more loyal country. The only ones who will benefit from the ban on cryptocurrencies in Russia are speculators or gray crypto exchanges. They will be able to get an influx of users and funds for additional withdrawal fees. Thus, the profitability of cryptocurrency assets will only increase.”
Igor Runets, CEO of BitRiver:
“All conscious subjects of the cryptocurrency industry in Russia are interested in complying with all the principles of KYC (know your customer) and anti-money laundering and counter-terrorist financing legislation.
Today, according to CoinGecko, the total value of more than 12 thousand cryptocurrencies in the world exceeds $2.2 trillion. According to ForkLog, in 2021, only the revenue of Bitcoin (Bitcoin) and Ethereum (Ethereum) miners in the world amounted to about $40 billion.
Rational and balanced regulation of digital currencies and other digital financial assets, in addition to the function of replenishing the budget, will improve the quality of life of the population and the growth of the country’s economy as a whole. If cryptocurrencies in Russia have their own specialized legislation, this will cause an additional powerful influx of Russian and foreign investments into Russia in the development of data processing centers (DPC) business with energy-intensive computing, in FinTech projects, in the future in Russian data center equipment in the amount of more than 100 billion rubles per year only at the first stages”
Sergey Mendeleev, Executive Director of InDeFi Smart Bank:
“Banning technology means losing all the personnel in this area, both entrepreneurs and programmers, as well as financiers, not forgetting just talented and “driven” entrepreneurs. It also means the loss of investments, including from leading international funds, which will have an extremely negative impact on the country’s economy. All this, in turn, will lead to a further outflow of young and talented people from the country, even those not connected with the crypt. And finally, this will deal a serious blow to the well-being of investors – funds, financial institutions, citizens who will lose the opportunity to invest in one of the most profitable and promising segments. While Singapore, Zug, Miami, Dubai, San Francisco, New York, Paris, London will receive all the benefits of being open to crypto, Russia, with its huge human capital potential, will ship all this capital for free to neighboring countries.”
Source From: MK