Predictable turnaround. Russian President Vladimir Putin opposes the recommendations of the Central Bank of Russia to completely ban the use of cryptocurrencies on the territory. At issue is the country’s strategic position regarding Bitcoin (BTC) mining.
Vladimir Putin contradicts the Central Bank of Russia
Last week, Russia’s Central Bank issued a report recommending a total ban on cryptocurrency trading and mining in Russia. The main reasons given were the volatility of the asset class, especially when compared to pyramid schemes, the risks to the sovereignty of monetary policy and the impact of the mining activity on the country’s ecological ambition.
It would appear that the Russian president is not entirely in agreement with these recent statements by the Central Bank of Russia. In a video posted on the Kremlin website on Wednesday, Vladimir Putin personally asks members of his government to open a dialogue with the Russian Bank about digital assets.
“We also have some competitive advantages here, especially in so-called cryptocurrency mining. I mean the surplus of electricity and the well-trained teams present in the country,” Putin said.
While he says he is aware of the risks crypto-assets pose to his fellow citizens, especially “because of the high volatility,” it is mainly the competitive position Russia has in this area that seems to matter to him.
Russia, 3rd largest hashrate country in the world
Since the total ban on Bitcoin (BTC) mining on Chinese territory, Russia – like Kasakhstan and other border countries – has welcomed an exodus of Chinese miners. While the Bitcoin hashrate from China completely died out in June 2021, the hashrate of miners in Russia increased from 7.2 Eh/s to 12.9 Eh/s in just two months.
Bitcoin hashrate evolution by country (Source: Cambridge Centre for Alternative Finance)
What Vladimir Putin wants to defend is this providential position as the third country with the highest hashrate rate in the world, behind the US and Kazakhstan. Finally, China’s ban on Bitcoin mining has given Russia a competitive advantage that it would rather take advantage of.
Beyond mining, Russia has already adopted a policy relatively similar to China’s on cryptocurrencies. In August 2020, crypto asset payments were banned in Russia and it would not have been surprising to see the country follow in its neighbour’s footsteps regarding mining activities.
