Discover How 20 Million Russians Tap Into Over $43B in Cryptocurrency

How Are Russians Adopting Crypto?

Russia has become a cryptocurrency hotbed, ranking as the 16th nation with the most crypto adoption in the world in the latest Global Crypto Adoption Index Report issued by Chainalysis.

Deputy Finance Minister Ivan Chebeskov estimated that at least 20 million Russians had invested in crypto products, and that more were on the way after regulations to license national exchanges and bring crypto capital to Russia were put in place.

But how are Russians using these 3.7 trillion rubles (nearly $44 trillion), and how much of this capital is really within the Russian government’s reach? In a recent investigation, Izvestia pointed out that these resources were divided into three pools, with the first one being their use in foreign trade settlements, as the Russian Federation is currently facing a disconnection from the SWIFT banking system, and even banks in friendly countries like China and Turkey might face secondary sanctions when serving Russian customers purchasing so-called dual-use products like microelectronics and automotive components.

This use case suits stablecoins best, as “Finam” analyst Alexander Potavin stresses that there is no volatility associated with these.

The second use of these assets would be associated with mining, as Russia still ranks second in the countries with the most hashrate, only behind the U.S., even as the government has expanded the existing prohibitions on crypto mining to more zones. Miners invest in electrical transformers, data centers, and electricity to sustain their activity, creating jobs and generating taxes. The government expects these incomes to keep growing in the coming years.

The third and largest pool of crypto assets would be allocated to speculative trading and savings in foreign exchanges. Nonetheless, Russia has begun enacting legislation to bring these funds home, allowing qualified and non-qualified investors to hold and trade cryptocurrencies within the country’s regulated exchange sector.

Nonetheless, the government still doesn’t allow crypto for everyday payments inside the country and has instead turned to the digital ruble, a national central bank digital currency (CBDC), to provide a digital currency for payments that is still under direct state supervision.

“There is no need to raise domestic demand for bitcoin and other digital assets, as this may increase the outflow of funds from deposits and create risks of financial losses,” Potavin told Izvestia, declaring that the Central Bank and the Ministry of Finance should focus on directing the use of these to foreign payments, as internal demand is a devaluation factor against the Russian ruble.