Could increased regulation make Russia the next major Bitcoin market?

Russia could evolve into the next major Bitcoin market as the government continues to encourage Bitcoin mining and moves closer to regulating its crypto exchange market.

Russia's plans

• Earlier this week, Cointelegraph revealed that Russian President Vladimir Putin approved the launch of the CryptoRuble, a cryptographically secure state-issued national digital currency.

• Communications Minister Nikolay Nikiforov said:

“I confidently declare that we run the CryptoRuble for one simple reason: if we don’t, then in two months our neighbors in the Eurasian economies will.

• Some analysts speculated that the launch of CryptoRuble could lead to a nationwide ban on Bitcoin and other cryptocurrencies. However, according to Putin, this is not the case and the Russian Central Bank also plans to regulate Bitcoin and cryptocurrencies.

• In a statement released by the Kremlin, Putin explained that Russia, similar to other countries such as the United States, Japan and South Korea, needs a regulatory framework to oversee cryptocurrency transactions and activities. However, he has no interest in banning digital currencies. Putin said:

“As we all know, many countries are seeking ways to regulate the circulation of cryptocurrencies and are beginning to create the necessary legislative framework, legislative regulatory system. We need - based on international experience - to create a regulatory environment that makes it possible to codify relations in this area, reliably protect the interests of citizens, businesses and the state, and provide legal guarantees for the use of innovative financial instruments.

• That’s a big change from just a week ago, when Putin denounced Bitcoin’s potential criminal uses.

• Russia is focusing on the regulation of Bitcoin and cryptocurrencies rather than an outright ban in order to retain a degree of control. If Russia bans cryptocurrencies, most trading activities will move to over-the-counter (OTC) markets and peer-to-peer (P2P) trading platforms, which are very difficult to review and regulate. With trading platforms equipped with know-your-customer (KYC) and anti-money laundering (AML) systems, the Russian government can prevent illegal activities using cryptocurrencies such as Bitcoin and Ethokalia.

• The Chinese government also recently made a statement suggesting that it is planning to introduce a national licensing scheme for crypto exchanges amid concerns that cryptocurrencies are linked to criminal activity.

Encourage mining

• In September, Alexander Drozdenko, the governor of Russia’s Leningrad Oblast, encouraged bitcoin miners and mining facility operators to establish digital currency mining centers in the region in order to promote and encourage other countries to participate in the global bitcoin mining industry.

• Local news publications, including 47 news reports:

"The production base of the newly built power units of the Leningrad nuclear power plant is being released and will be available to new residents by 2018."

• Drozdenko also told local journalists in a press conference covered by Bitcoin.com:

“As you know, the construction of LNPP-2 is being completed in Sosnovy Bor and large parts of the area of ​​the first plant are being liberated, adding that the site could be of interest to crypto-mining companies.

• If the Russian Bitcoin mining and cryptocurrency exchange markets, supported by the regulatory framework released by the Russian government, show exponential growth rates, Russia could evolve into the next major Bitcoin market in the long term.