Bitcoin surged last night, possibly due to this country's move

Written by: Deng Tong, Golden Finance

After the 805 coin crisis, the crypto market was shrouded in dark clouds: the price of Bitcoin plummeted from more than $70,000 at the end of July to below the $50,000 mark. The panic index even dropped to 17 at one point, and the level changed from fear to extreme fear. People once doubted "Is the bull still there?"

But starting from August 8, the crypto market seemed to have a spring breeze overnight, and cryptocurrencies generally rose. After 805, the market quickly recovered. This morning, Bitcoin even reached $62,394.50, up 25.33% from the low of $49,781.93. The reason is that the huge changes in the crypto market are closely related to the mining legalization policy introduced by Russia.

What does the new Russian mining regulation say?

On August 8, 2024, Russian President Vladimir Putin signed a law legalizing cryptocurrency mining in Russia.

The signed law introduces new concepts, including digital currency mining, mining pools, mining infrastructure operators, address identifiers, and individuals who organize mining pool activities. Mining itself is recognized as a component of turnover, not the issuance of digital currency.

Only registered Russian legal entities and individual entrepreneurs are entitled to engage in mining. Individuals who do not exceed the energy consumption limits set by the Russian government do not need to be registered to mine digital currencies.

According to the document, foreign digital financial assets can be traded on Russian blockchain platforms, and the Russian Central Bank has the right to ban their issuance if it finds that individual issuances pose a threat to Russia's financial stability.

Previously, Putin discussed the introduction and use of digital currencies with the government at a meeting on economic issues. He pointed out that this is a promising economic field and Russia must "seize the opportunity" to quickly establish a legal framework and regulations and develop infrastructure to create conditions for the circulation of digital assets.

The new mining regulatory policy will be the responsibility of the Russian Central Bank, the Ministry of Finance and the Russian government's Cabinet, who will develop more precise regulatory content in the coming months. The bill also prohibits large-scale cryptocurrency advertising in Russia.

The law will take effect ten days after its official publication, except for provisions that specify an effective date.

Russia has long been hinting at the introduction of new mining regulations

Russia has long been hinting at the introduction of a new mining bill. As early as December 14, 2023, the Russian Ministry of Finance proposed a new bill seeking to legalize BTC mining and establish a mechanism for selling mined currencies. The bill includes provisions prohibiting cryptocurrency advertising and requires cryptocurrency sales to be conducted through foreign platforms, excluding the use of Russian information infrastructure. Both the Ministry of Finance and the Central Bank of Russia support the recognition of cryptocurrency mining as an industry and the use of cryptocurrencies for settlement of foreign economic activities within the framework of experiments. According to the proposed bill, cryptocurrency miners can obtain digital currencies through foreign systems or dedicated platforms established for experiments. In either case, miners must report these transactions to the Federal Tax Service. The central bank recommends that the sale of mined cryptocurrencies be limited to non-residents and only through foreign infrastructure.

On May 6, 2024, Anton Gorelkin, chairman of the Russian State Duma Committee on Financial Markets, said that he does not support a complete ban on the circulation of cryptocurrencies in Russia. He explained in a post on Telegram that the restriction is not intended to ban the use of all cryptocurrencies, but to regulate the establishment of cryptocurrency exchange platforms within the legal framework of Russia. Anton Gorelkin also believes that the establishment of legal crypto infrastructure in Russia is affected by geopolitical realities. This requires taking into account factors related to international relations. He went on to add that allowing such infrastructure could subject Russian businesses to Western sanctions. In addition, Anton Gorelkin also pointed out that this restriction may be lifted in the future, saying that users can still use foreign cryptocurrency exchanges and over-the-counter services as before. However, the impact on many over-the-counter cryptocurrency services in Moscow is uncertain.

In July 2024, Russia considered adding the topic of stablecoins to the upcoming bill, allowing the official use of stablecoins to complete cross-border payments. Alexey Guznov, deputy governor of the Bank of Russia, announced that a proposal had been submitted and the issue was currently being discussed. The Ministry of Finance also confirmed this.

On July 13, 2024, BITCOINLFG revealed on the X platform that Sources said that Russian President Putin may make a major statement on Bitcoin and cryptocurrency in the next few days.

On August 3, 2024, Golden Finance pointed out in a report: Anatoly Aksakov, Chairman of the Financial Market Committee of the Russian State Duma, has predicted that at some point in the future, citizens will be able to exchange Bitcoin and digital rubles, and a P2P market based on the digital ruble is needed to achieve this goal.

In summary, Russia has laid a lot of groundwork for the introduction of a new mining bill. The introduction of the new regulations was actually expected.

Why is Russia promoting the legalization of cryptocurrency mining?

Russia's crypto asset regulatory policy was not very conducive to the development of the industry in the early years. So, what made Russia's attitude towards cryptocurrency change from "no support" to "mining legal"?

On December 10, 2020, Putin signed a decree prohibiting certain Russian officials from holding any cryptocurrency. In December 2021, the Russian Central Bank warned of the risks associated with digital assets and even proposed a complete ban on cryptocurrency mining and trading.

However, on February 24, 2022, the full-scale Russian-Ukrainian conflict broke out, and this war can be seen as a turning point in Russia's attitude towards cryptocurrencies.

According to the BBC, the United States, the United Kingdom, the European Union, as well as Australia, Canada and Japan have imposed more than 16,500 sanctions on Russia since the full-scale outbreak of the Russian-Ukrainian conflict.

Their main target is Russia's funds - $350 billion (£276 billion) worth of foreign exchange reserves have been frozen, accounting for about half of Russia's total foreign exchange reserves.

The EU said that about 70% of the assets of Russian banks have also been frozen, and some banks have been excluded from the Swift international funds clearing system, which provides secure and efficient communication services for financial institutions.

According to the International Monetary Fund, in 2022, Russia's GDP growth rate was -2.1%. In 2023, Russia's GDP growth rate was 3.6%. In 2021, before the start of the Russian-Ukrainian war, Russia's GDP was 4.7%.

It can be seen that in the centralized international financial system, Western sanctions have indeed caused Russia to suffer an economic winter. Faced with multiple rounds of economic sanctions, Russia finally chose to embrace cryptocurrency.

In 2022, Putin believes that Russia has some advantages in cryptocurrency mining, and cryptocurrency mining should be taxed and regulated, and supports limiting mining to areas with excess electricity, such as Irkutsk, Krasnoyarsk and Karelia.

On February 13, 2022, Russia amended the "On Digital Currency" Act, restricting the purchase of cryptocurrencies by non-qualified investors, and requiring them to pass an exam before purchase. Qualified investors can purchase up to $7,000 worth of cryptocurrencies per year, while unqualified investors are limited to $600. The bill also defines digital currency as property, providing a legal basis for cryptocurrency payments.

On April 20, 2023, Elvira Naiullina, head of the Russian regulatory agency, said that the Central Bank of Russia is preparing a bill that will introduce an "experimental legal system" that will allow cryptocurrencies to be used exclusively for import and export transactions. As part of the regulation, new tax laws will be introduced for miners. The central bank’s plans include setting up specialized organizations for cryptocurrency mining and processing payments for cross-border trade agreements.

In November 2023, Russia developed a tool to help crypto miners evade sanctions, which will help Russian companies make cross-border payments. Anton Tkachev, a member of the Russian State Duma Committee on Information Policy, Information Technology and Communications, said that the country’s Ministry of Industry and Trade has successfully developed “a tool for conducting industrial mining activities.” He claimed that cryptocurrencies can help Russian companies evade Western sanctions when trading abroad.

The Russian Central Bank recently suggested that companies use cryptocurrencies and digital assets to mitigate the impact of Western sanctions following the conflict in Ukraine. The Governor of the Central Bank of Russia, Elvira Nabiullina, acknowledged that payment issues are critical to the Russian economy and emphasized the role of new financial technologies in creating unprecedented solutions.

Russia's trade relations with many countries are facing difficulties due to sanctions against major Russian financial institutions. Nabiullina said: "New financial technologies create opportunities for programs that did not exist before. That is why we have relaxed our stance on the use of cryptocurrencies in international payments, allowing the use of digital assets in such payments."

US response to Russia's evasion of sanctions through cryptocurrencies

On the one hand, Russia has found a shortcut to evade Western sanctions through cryptocurrencies. On the other hand, the United States will also begin to worry about Russia's move to evade sanctions through encryption.

In July 2024, Congressman Brad Sherman (D-CA) questioned Yellen about Russia's use of cryptocurrencies and stablecoins to evade Western sanctions. "The Russian Central Bank urges the use of cryptocurrencies to evade Western sanctions. There is no particular advantage to a stablecoin because it is stable, you cannot make money by holding it, and it generally does not pay interest - certainly not the interest you earn on a money market fund. Its only advantage is to evade our sanctions and other laws, including tax laws, and I hope that when you impose sanctions on Russia, you will not promote this by promoting stablecoins."

Yellen replied: We are very concerned about the use of cryptocurrencies and stablecoins. We think what Russia is doing is not a big deal, but as our sanctions become more and more severe, it becomes a concern.

Summary

Russia's adoption of the new mining regulations is an important step to break through the Western economic blockade. It is true that Western sanctions have had a serious impact on the Russian economy, but Russia has chosen to embrace the decentralized world. In this emerging financial door, the spirit of equality and freedom behind Bitcoin may bring hope of rebirth to the Russian economy. The crypto world will also become more realistic with the participation of the "polar bear", showing the charming appeal of the crypto punk world.

Source: Golden Finance, TASS, Coingecko, CoinTelegraph, BBC, FX168