Is Russia’s Crypto Conquest Inspired by Sanctions and Russophobia?

In the West, you would be hard pushed to come up with a handful of cryptocurrency or blockchain companies from Russia that operate successfully and prominently outside of the country (beyond neighbouring ex-bloc territories).

It’s a similar situation for almost any industry from the country, FinTech and beyond, and a large reason for this comes as a result of sanctions imposed by the U.S. government. Considering ongoing russia-phobic sentiments being spread in the USA as well as Europe, it would be hard to see such an enterprise even being marketable in the current climate.

There are actually many companies operated by Russian nationals in the West, however they predominantly establish headquarters and brands in the local regions to avoid scrutiny from the press – as well as build a locally friendly image.

Even these efforts, however, are not enough to prevent McCarthy-esque headlines such as ‘Revolut’s ‘Kremlin links’ to be probed as politicians warn digital bank could risk national security’ – which was published by the UK paper The Telegraph, back in May 2019.

There has been a recent increase in blockchain-focused activities coming from state-approved organisations, as well as the Russian government directly. This appears to be in correlation with the aforementioned problems facing Russian businesses and entrepreneurs.

Take, for example, the publication of an official whitepaper from the Russian National Settlement Depository (NSD) – “the largest securities depository in Russia”, which outlines the institution’s ‘Vision of Blockchain Use in Financial Infrastructure’.

Lawmakers have also recently been closing in on plans to create standardized legislation on digital asset tokens, as well as a law which would enable authorities to requisition cryptocurrency funds from suspected and convicted criminals.

In addition, the Russian Central Bank announced its intentions to implement or create a gold-backed cryptocurrency.

Although it is difficult to conclude the myriad of reasons each country may have, there are some notable links between Russia and China on the geopolitical stage.

Both countries are facing significant trade sanctions, from the USA and (by extension) other Western nations at present. A move towards cryptocurrency based economic models may help each nation respectively overcome these restrictions, as well as those imposed by the ubiquity of the U.S. Dollar standard.

Another point of comparison is with the recent gold-purchasing rush exhibited by both countries recently – which perhaps reflects the disparity between their respective global economic prowess, with the potential fragility of a currency which is not backed by tangible materials.

The main question to ponder upon finishing this article would be: are the increasing US trade war sanctions and employment of anti-Russia and China sentiments as common political currency driving these countries towards cryptocurrencies?

Russophobia and sanctions (similar with #China) decrease the purchasing power of their fiat currencies (ruble and renminbi)… further incentive for the adoption of digital tokens.

What could be the implications (legally and economically) were either to employ cryptocurrency officially and back it with their massive gold reserves?

Although the trajectory of news coming out of Russia has been much more consistent, with a longer tail than China,, there are parallels that can be drawn with the intensification of national cryptocurrency activities in China.

China has been pushing towards what appears a standardization, legitimisation, and even state-backed support for cryptocurrencies and blockchain at an even faster rate than Russia – and most of the news has come out of the past 30 days.

Earlier this month, it was revealed that a national regulator had removed a previously proposed ban on cryptocurrency mining in a 2020 update to an official guidance document originally published in 2011.

Subsequently: the President of China, Xi Jinping, delivered an official endorsement for cryptocurrency as well as later advocating for increased blockchain adoption in the countries financial and technology sectors. This message was so successful that it led Jinping to deliver another statement in an attempt to calm the nerves of eager investors.