Why Russia makes Bitcoin swell
by Marco Dell’Aguzzo
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Why Russia makes Bitcoin swell
The idea is circulating that Russia will rely on cryptocurrencies to circumvent Western sanctions, which is why the value of Bitcoin rises. Facts, numbers and insights
Bitcoin, the most popular cryptocurrency, rose 4.4 percent this morning to $ 43,460; the day before the gain had been even more substantial, 10 percent. Analysts have traced these increases in value, after the declines suffered previously, to the belief that Russia will make extensive use of cryptocurrencies after some of its banks have been expelled from the SWIFT network (here the in-depth study by Startmag) and sanctioned.
RUSSIA AND THE BITCOIN
Bitcoin trading volumes using the ruble, the Russian currency, have grown to their highest level since last May; those using the Ukrainian currency, the hryvnia, are at their highest since October. According to Bloomberg, there is a tendency to prefer Bitcoin at critical times and with poor market predictability.
The possibility of carrying out transactions in Bitcoin – reads the Guardian – could allow the great Russian rich (the so-called “oligarchs”) to circumvent Western sanctions. And it could allow Russian companies affected by the penalties, and even the country’s central bank, to move funds now that they no longer have access to the dollar and that many financial institutions have been ousted from SWIFT.
Without adequate countermeasures – continues the newspaper – Bitcoin could become the main safe haven for the Russians after the international crisis that broke out with the invasion of Ukraine.
THE REQUEST OF THE UKRAINE AND THE REPLY OF THE PLATFORMS
That the possibility that Russian subjects can move their funds into cryptocurrencies exists and is concrete has in a sense been confirmed by the Ukrainian government, which has asked the platforms to block the addresses of Russian users. One of these exchange platforms, Binance – on which there are numerous ruble-Bitcoin exchanges – has made it known that it will block accounts affected by Western sanctions, while refusing to “freeze unilaterally” all the millions of Russian profiles.
THE MOVES OF RUSSIA FOR THE DIGITAL CURRENCY
Russia is also developing its own central bank digital currency (however, it is not a cryptocurrency because it is subject to central control), the digital ruble, to use in direct trade with other countries, without first converting it into dollars.
In October 2020, some Russian central bank officials explicitly stated that the digital ruble would make the country less dependent on the United States, the dollar and the global banking system, and better able to resist sanctions.
In order to circumvent the West’s penalties, however, Russia will first have to find foreign governments and companies that agree to conduct direct transactions in digital rubles.
HOW IS BITCOIN GOING IN UKRAINE
Since the start of the war, the daily volume of cryptocurrency trading on the Kuna platform in Ukraine has more than tripled to $ 5 million. As Reuters explains, cryptocurrency assets are contained in decentralized “wallets” accessible anywhere – a feature that has proved beneficial for many Ukrainians, given the situation in the country.
RUSSIA AND MINING
According to estimates by the Cambridge Center for Alternative Finance, updated to last August, Russia is the third country in the world for Bitcoin mining (i.e. the process of creating, in the jargon “extraction”, of a new currency). Moscow alone is worth 11.2 percent of the global hashrate capacity (i.e. the computing capacity used by computers connected to the Bitcoin network); it is preceded by Kazakhstan, with a share of 18.1 per cent, and by the United States, in first place with 42.7 percent.
THE LIST OF COUNTRIES FOR THE USE OF CRYPTOCURRENCIES
According to Chainalysis’s 2021 Global Crypto Adoption Index, in 2021 the country with the highest cryptocurrency adoption rate was Vietnam, followed by India and Pakistan. Their scores are 1, 0.37 and 0.36 respectively. Ukraine follows in fourth place with a score of 0.29.
Russia is far behind, at 0.14. The United States is at 0.22.