Crypto Payments on the Rise in Russia Despite Legal Uncertainty

Russia is witnessing a surge in crypto adoption, as more people are using digital tokens for payments, according to a leading academic. However, the legal status of cryptocurrencies remains unclear and restrictive in the country.

Crypto Becomes Part of Everyday Life

Evgeny Kogan, Professor of Economic Sciences at the National Research University Higher School of Economics (HSE), said that interest in cryptocurrencies has grown greatly in Russia in recent years. He claimed that the number of citizens who now make transactions with Bitcoin and other tokens has increased, and that cryptocurrencies are becoming a part of everyday life.

“Cryptocurrencies are becoming a part of our lives. And for some, they have already become a means of payment,” Kogan said in an interview with Coinspot, a Russian-language media outlet.

Kogan added that crypto adoption is driven by various factors, such as the desire to diversify income sources, hedge against inflation, avoid capital controls, and access global markets. He also noted that crypto users are mostly young, educated, and tech-savvy people who are not afraid of risks and challenges.

Crypto Regulation Remains Ambiguous and Restrictive

Despite the growing popularity of crypto in Russia, the legal framework for the industry is still underdeveloped and unfavorable. In July 2020, President Vladimir Putin signed a law that recognized cryptocurrencies as a type of property, but banned their use as a means of payment for goods and services. The law also imposed strict requirements for crypto exchanges and service providers, such as registration, licensing, and reporting.

In addition, the Central Bank of Russia has been vocal in its opposition to crypto, warning about the risks and dangers of the technology. The regulator has also been developing its own digital currency, the digital ruble, which is expected to be launched in 2025. The digital ruble is intended to be a legal tender that will coexist with cash and non-cash rubles, and will be controlled and issued by the central bank.

Kogan said that the current regulation of crypto in Russia is contradictory and confusing, and that it creates barriers and uncertainties for the industry. He argued that the authorities should adopt a more balanced and progressive approach, and that they should learn from the best practices of other countries, such as Switzerland, Singapore, and Estonia.

“The regulation of cryptocurrencies in Russia is still in its infancy. It is necessary to create clear and transparent rules that would stimulate the development of the industry, protect the rights and interests of consumers, and prevent fraud and money laundering,” Kogan said.

Crypto Mining and Innovation Thrive in Russia

Despite the legal hurdles, Russia has emerged as a global leader in crypto mining and innovation. The country has abundant and cheap energy resources, especially in its eastern regions, such as Siberia and the Far East. The cold climate also helps to reduce the cooling costs of mining equipment.

According to BitRiver, Russia’s largest industrial crypto mining firm, the country accounts for about 10% of the global Bitcoin hash rate, which measures the computing power of the network. BitRiver recently announced that it is building a new 100MW data center in Eastern Siberia, which will increase its total capacity to 300MW.

Russia is also home to many talented and creative crypto developers and entrepreneurs, who have created various projects and platforms in the field. For example, Telegram, the popular messaging app, was founded by Russian brothers Pavel and Nikolai Durov, who also launched the Telegram Open Network (TON), a blockchain platform that was later shut down due to regulatory pressure from the US. Another example is Waves, a decentralized platform for Web 3.0 applications, which was created by Russian physicist and entrepreneur Alexander Ivanov.

Kogan said that Russia has a huge potential to become a global hub for crypto innovation, and that it should support and encourage its local talent and expertise. He also said that crypto education and awareness are essential to foster a positive and informed attitude towards the technology among the public and the authorities.

“Russia has a lot of advantages and opportunities in the field of cryptocurrencies. It has a rich scientific and technical potential, a large and active community of enthusiasts and professionals, and a favorable natural and economic environment. It is important to use these resources wisely and efficiently, and to create a favorable climate for the development and adoption of cryptocurrencies,” Kogan said.