Russia: A glimmering hope in a bearish market
2022 has not begun in the right way as all the Crypto enthusiasts hoped for with the total market cap down by over 20% but it’s not all doom and gloom in the crypto space. Although the hope might not come from a pro-bitcoin country like El Salvador or Nigeria, it is still currently expected to have a significant impact on the possibility of the crypto space recover within this year. Let’s take a closer look at Russia’s unexpected move to regulate cryptocurrency and what effects it might leave on the crypto space.
Russia’s unexpected move to regulate cryptocurrency
Russia has clearly not been the most obvious backers of the crypto space seeing what happened with China. Crypto in Russia has always been a love-hate relationship with the people love to utilize to embrace cryptocurrency but they faced opposition from some of the banks in Russia who insist that all the cryptocurrency activity should outright be banned from the country but is it a viable option considering the major contribution Russia is giving to the crypto space?
One of the most well known contribution is definitely the founder of Ethereum Vitalik Buterin who was born in Russia but then went on to build probably the second largest cryptocurrency in terms of Market Cap and the largest in terms of DeFi. Russia is also home to a thriving mining industry, with the country’s estimated contribution of 10% from the world mining capacity being ranked the third largest after the US and Kazakhstan. Some of the biggest mining facilities in Russia located around Siberia where the temperatures is low and there is access to cheap mining power. Russia is also currently in the top 5 in terms of the amount of crypto users within the country with 17.3 Million only bested by India and USA with an annual trading turnover reaching $5 Billion last year. So considering all of this Russia is well set up to be the global leader in the crypto space then why does the Central Bank of Russia insist on a crypto ban within the country?
Russia already bans the use of crypto to make payments and the central bank in December prohibited mutual funds from investing in it so there is almost no possibility of Russia going to follow in El Salvador route but the reports suggest that the Central Bank could be looking to extend those bans to include the mining sector and the trading or exchange of cryptocurrency within the country.
The central bank’s hard line against the trading or exchanges of Cryptocurrency is centered around preventing this non–traceable payment from being used to fund undesirable organizations that could be a threat to the country’s security, according to the people familiar with this issue.
“Crypto bears the hallmarks of a pyramid scheme and undermines the sovereignty of monetary policy”, said the Central Bank. Unfortunately with this statement the mining sector also took a hit, “it hurts the country’s green agenda, jeopardizes Russia’s energy supply and amplifies the negative effects of the spread of cryptocurrencies, creating incentives for circumventing attempts at regulation.”
Despite all the hard lines from the Central Banks, the government and its president Vladimir Putin himself acknowledge the competitive advantage that Russia has over the mining sector and favour the regulating of cryptocurrency within the country instead of an outright ban. With the President recently tasked the government to work on ways to regulate crypto and the ban proposals made by the central banks were soon rejected.
The road map that was recently signed by the deputy chairman of the government, Dmitry Chernyshenko suggests the introduction of knowing your customer (KYC) and anti-money laundering (AML) rules for cryptocurrency platforms, defining their regulatory status, mandating a supervisory body and establishing penalties for those who don’t play by the rules.
The plan was drafted by a working group, comprising of several government agencies and according to the schedule set that by May this year the Ministry of Finance should have designed a system of compliance control for peer-to-peer (P2P) platforms. By November, the AML standards set by the Financial Action Task Force should be implemented and by December, the rules for regulations and reporting standards should be created.
So with Russia looking to regulate cryptocurrencies, how big of an impact will this have on the crypto space in 2022?
Effects on the Crypto Space
It is obviously a sigh of relief that Russia did not go on to ban Crypto and this sounds even better looking at the current Bearish state the market is in. Russia in itself other than the United States and China have a major influence on the world economy with not only it being a part of G20 Countries but also of its close relation with India and Kazakhstan. Both of these countries are pivotal in the growth of crypto with Kazakhstan as mentioned earlier currently the second largest in the crypto mining sector while India is currently with the most crypto users within the country. Russia’s move to regulate cryptocurrency should be a great example of encouraging other countries to follow the same path.
Russia also currently hold one of the largest percentage of users within the country with the 17.3 Million of Crypto Users sits at 11% of their current population, this obviously means that the awareness of cryptocurrency within Russia is pretty high and banning crypto will not only put a stop to the growth of these numbers but also restrict innovations within the country.
The attempt to regulate cryptocurrency within Russia also stops the space from losing one of the main mining contributors worldwide and we have seen how devastating those effects were when China pulled out. Not only was China the epicenter where mining rigs were produced but it also at one point of time controlled 50% of the Bitcoin hashrate. When the miners are not validating transactions, not only bitcoin transaction fee and Ethereum gas fees with the overcrowded network but it also triggers a panic sell-off which reduces its price to almost 50% of its all-time highs and the network eventually took 7 months to recover.
Of course with Russia it will not be as bad of an effect but with the Bitcoin hashrate expected to double this year in 2022, Russia’s 10% contribution could mean a lot. This effect obviously translates to the market where ever since the road map was drawn up on the 28th January, Bitcoin price has improved from $36,000 to $38,000 and same goes with Ethereum going from $2,335 to $2,600. With this, it is clear that Russia a week ago might not be the expected saviour of the space but its intention to regulate cryptocurrency could be a major contributing factor to the upward trajectory of the Crypto space in 2022.
We in Nagaya Technologies Pte. Ltd surely believe that proper regulation is necessary to secure and make the cryptocurrency space accessible. We hope that regulations could come soon in Russia and so the revolutionary concept of Nagaya could be felt by everybody. For more information regarding on the latest updates on Nagaya and our whitepaper, you can visit us at nagaya.io
Or you can talk to us at t.me/nagayaofficial
