Paying for Russian gas with Bitcoin

Russia, which has long been considered a stronghold for crypto-money laundering, apparently wants to create a second pillar for itself and, in addition to increased involvement in mining, also settle its gas transactions with friendly states in Bitcoin. At the beginning of the year, Putin is clearly more crypto-friendly than in previous years. Apart from the presumed damage to the world’s reserve currency, the US dollar, this could above all have the purpose of mitigating Western sanctions.

On 24 March, Pavel Zavalny, chairman of the Russian Energy Committee, announced that Russia would in future accept Bitcoin for payments from “friendly” states in addition to roubles and local currencies: “We have been proposing to China for a long time to settle roubles and yuan in local currencies. With Turkey, it will be lira and ruble. The currencies can be different, that is a common practice. You can also trade bitcoins,” Zavalny said, according to the BBC.

Weakening the dollar and euro

Russia’s goal is reportedly to weaken the hard currencies, the US dollar and the euro. However, Bitcoin as a means of payment for Russian gas also poses risks, as it brings volatility to an otherwise stable energy business. Moreover, the Russia-friendly states of China and Turkey have a rather stepmotherly relationship with cryptocurrencies. China has declared all crypto transactions illegal in 2021 and Turkey also has a ban on cryptocurrencies. This means that two potential trading partners are wobbling – and Russia doesn’t have that many other friends at the moment…

The fact is that rouble payments in cryptocurrencies skyrocketed at the beginning of the Ukraine war. This is mainly due to small investors who invested their soon-to-be worthless and no longer available roubles in cryptocurrencies – but one or the other whale might not have been entirely uninvolved either.

Russia’s Mining Offensive

After the ban in China, legions of miners went on a global search for cheap electricity. They found what they were looking for not only in emerging markets, but also in Russia, which has shown itself to be hospitable and generous with energy. In view of the current sanctions situation, a comparison can be drawn with Iran, which is also circumventing Western sanctions by means of bitcoin mining. Currently, Russia’s hashrate ranks third after the US and Kazakhstan, but Russia seems to be increasing its share: According to “BTC Echo”, Russian services have received significantly more cryptocurrencies from mining pools since the beginning of 2022. This suggests that the Russian state is already promoting bitcoin mining or is taking final steps in this direction.

To what extent this will influence the price and also the reputation of Bitcoin remains to be seen. It is doubtful, however, that the dollar will be weakened in the long term by the Russian activities, but it can be assumed for certain that the already battered rouble will lose even more value as a result.

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