Rising fees and the black market: neighbouring countries weigh in on a ban on Bitcoin in Russia

On January 20, the Bank of Russia put forward for discussion a proposal for a full ban on cryptocurrency operations and mining in the country. ForkLog has learned how likely it is that Bitcoin investors and miners from Russia could emigrate to Ukraine, Belarus, Kazakhstan and Georgia.

The experts we surveyed from neighbouring states agreed that the regulator’s initiative is counterproductive in essence, since banning P2P transactions is impossible.

The Belarusian developer of cryptocurrency legislation, and the senior partner at the law firm “Aleynikov and Partners,” Denis Aleinikov, argued that a total ban would not help the authorities to control the transparency of financial flows. On the contrary, a soft regulatory approach like Belarus’s would promote transparency of operations with digital assets.

The expert did not rule out that Russians might view Belarus as a jurisdiction to move to.

«Запрет приведет к тому, что черные и серые операции уйдут глубже в тень, а легальные бизнесы и финтех, которые могли бы стать точкой роста, перестанут развиваться в РФ и часть из них уйдет в Беларусь. Сейчас российские банки через своих дочек и так присутствует на рынке Беларуси и часть из них работает с криптовалютами, поскольку цифровые активы здесь находятся в легальном поле», – сообщил Денис Алейников.

He said that he had provided legal support to BelVEB Bank (part of the VEB RF system) for opening in Belarus a platform for tokenising real-sector assets, Finstor.by.

«Подобные истории будут развиваться. В Беларуси сейчас без проблем можно открыть криптобиржу, выпустить любые токены или организовать майнинг. И есть масса преимуществ – токены не являются ценными бумагами, для майнинга в прошлом году приняли льготный электротариф и в целом любые доходы от крипты освобождены от налога», – добавил юрист.

Some foreign miners currently in Kazakhstan, in light of the latest news, abandoned plans to relocate to Russia, ForkLog was told by Alan Dordzhiev, president of the local National Association of Blockchain and Data-Center Industry. However it’s too early to say that Russian mining business will flow to Kazakhstan.

«Удивлен, что этой инициативой занимается Центральный банк, а не Министерство экономики. В таком случае, очевидно, что это вопрос монетарной политики», – отметил Дорджиев.

Overall he described the news as shocking and stressed that denying cryptocurrency as a new social phenomenon «will certainly not bode well».

There is little chance of a place for Russian miners in Georgia’s market. Lasha Antadze, founder of the decentralised auction Shelf.Network, is very skeptical about the prospects of the crypto industry in the country — already connecting additional mining power is causing electricity shortages.

«В горных районах, где государство субсидирует расходы, у нас колоссальный рост потребления и власти бессильны решить эту проблему», – поделился предприниматель.

Antadze said that in late December 2021, residents of the mining town Mestia were forced to swear on icons that they would switch off the miners they had. But statistics showed consumption only increased. 

Founder of Ukrainian Bitcoin exchange Kuna, Mikhail Chobanyan, believes that the Bank of Russia’s statements in the long term aim to clear the market for a particular player who will reap super profits from crypto operations.

«This player will provide the market with rules of the game, following which the same exchanges are likely to continue operating; only the fees for end users will rise and there will be a 100% leakage of all information to law enforcement agencies, because, presumably, this will be shielded by certain authorities,” – Chobanyan said.

However, he remained skeptical about the idea of moving Russian miners to Ukraine, explaining that the power connection would be too expensive.

Stanislav Boris, a security practice consultant at Juscutum, does not rule out that harsh policy by Russian authorities could spur migration of market players to countries with a permissive regulatory framework for the industry. Ukraine could also be among them, thanks to the final-stage consideration of the law “On Virtual Assets.”

«In case of creating an effective platform for cryptocurrencies with investor protection, Ukraine’s attractiveness for providers of services related to the turnover of virtual assets, market participants and miners will rise. This will undoubtedly positively influence investment inflows into the country’s economy», – summarized the lawyer.

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