Following the collapse of the Soviet Union, Russian companies have often depended on imports from outside Russia to meet domestic demand. Minerals and petroleum are largely imported as well. The share of Russian export supplies in industries like aluminum and steel may be more than 80% (due to former Soviet state-owned enterprises). Shutting off this supply would lead to an eventual shortage in production for these industries, which could cause severe problems for Russia’s manufacturing sector. You can start your trading journey by using a reliable trading platform like Bitcoin Sprint.
It has led many people in those industries to worry about increased sanctions against Russia — sanctions that might come from US president Joe Biden’s administration following Moscow’s annexation of Crimea and its involvement in Ukraine’s civil war. As for bitcoin, many Russian-based bitcoin exchanges serve the country and the geographic region surrounding it. Russia has long been known as one of the largest markets in the world for bitcoin.
The question is whether or not these markets will remain strong in the months and years to come. Will they see growth or contraction? Which countries currently are moving into those markets, and which ones are claiming them? The answers to these questions may provide a better picture of where cryptocurrencies are heading today.
Why Are Bitcoin Exchanges Popular in Russia?
Many Russians are turning to unregulated bitcoin marketplaces to meet their financial needs, as the Russian banking sector is fraught with problems. In 2014, the United States government pressured all US banks to halt any relationships with the former Soviet state.
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The move caused many Russian banks to freeze accounts belonging to clients outside of Russia and led some companies like Aeroflot airlines and MegaFon Telecommunications Company to turn away from American payment entities like Visa and MasterCard. Plus, there is a more significant number of payment processors in that geographic region than in most other places around the globe.
Most bitcoin exchanges in Russia operate under the eye of the government. However, the majority are located on the outskirts of major Russian cities, giving them a chance to be less likely to attract unwanted attention from regulators. As a result, they have many users and have built a large community over the past few years.
The largest bitcoin exchange in Russia is BTCKi — launched in 2014 — which claims to process around $5 million daily transactions. However, it has been forced to deal with problems related to regulatory compliance since its inception, including fines for operating without a license. In addition, BTCKi has suffered persistent outages over the past few months.
Russia-Ukraine War increased bitcoin adoption in Russia:
There has been a lot of discussion in the bitcoin community about the effect on bitcoin’s adoption should Russia launch an all-out war with Ukraine. The increased economic and social instability could lead to a severe currency crisis affecting not only Russians but Ukraine as well; since the ruble’s value has been on the floor lately, bitcoin seems to be a valid option as a monetary system to perform trade.
All the more, bitcoin, as compared to the ruble, is more efficient in terms of international transactions, security, and scalability. Moreover, bitcoin is turning into a global currency, making it easy for Russia to trade in any region using bitcoin.
In addition, there is speculation that oil and gas markets will freefall the region, causing even more upheaval. It is due to Russia’s industrial sector and its dependence on imported commodities while at the same time facing increasing problems such as power outages and civil unrest. Russia’s withdrawal of banking services from Ukraine has also led many Ukrainians to turn to bitcoin exchanges in Russia and Belarus (located outside of the country).
The Bitcoin Environment in Russia and the Ukraine Conflict
Ukraine’s parliament was one of the first places to recognize bitcoin as a legal entity, even passing a bill that would have made the cryptocurrency its official national currency at one point. However, when the news broke, it served as a blow to several other prominent people who had been in support of virtual currencies, such as Russian finance minister Alexei Moiseev. The country has also taken steps to prevent others from skirting sanctions placed on Russia by banning transactions with accounts on all Russian banks and exchanges outside of Ukraine.
According to digital currency exchange BTCKi, a growing number of individuals in Crimea and Eastern Ukraine are using bitcoin as an alternative to the Russian ruble. As a result, exchange volumes have grown by 300% from January 2014 to March 2014. The exchange processed over $10.5 million in bitcoin purchases during that period.
Due to the conflict between Russia and Ukraine, many individuals have had to change their locations of operation within the last few years. Since it’s a risk for some businesses or individuals, bitcoin would seem like a viable option for companies or individuals seeking new business opportunities or trying to save money on fees by avoiding currency exchange fees when receiving payments from another country. In short, yes, Russia is the new bitcoin hotspot.