Why is the Crypto Scene So Active in Russia?
The #BinanceIsGlobal series explores Binance’s community around the world and the role each region plays in the blockchain ecosystem. For this series installment, we take a look at the immense popularity of cryptocurrency and blockchain in Russia.
Perhaps it’s not surprising that Russia is a hotbed for cryptocurrency activities, from trading to mining to ICOs. After all, Vitalik Buterin, the creator of Ethereum, was born in Russia.
Nevertheless, the great presence of Russians in the crypto scene is an interesting trend to observe. About 15% of the world’s traders are from Russia, compared with 30% from the US, 10% from each of China and Vietnam, and single-digit figures for the rest of the world, according to BDCenter. Meanwhile, venture capital firm Atomico noted that Moscow tops other areas in the world when it comes to the number of CEOs or founders of ICO projects.
In this story, we take a look at some of the factors that explain why crypto is a hit in Russia, ahead of some of the more developed areas in the world.
Russia has a surplus of tech talent
One of Russia’s inherent advantages is its strong science and technology program, a legacy of the heyday of the Soviet Union. This has resulted in an abundance of professionals who are well-versed in mathematics, programming, cryptography, and other disciplines that are adjacent to the blockchain industry. Even accounting for the numerous major tech companies in Russia, such as Yandex, VK, Kaspersky, and more, there’s a lot of talent to go around. In fact, a lot of these professionals see themselves as creators, as shown by Pavel Durov of VK and Telegram fame and Eugene Kaspersky of the eponymous antivirus service.
However, this abundance does not solely explain the country’s crypto inclinations. Some countries are comparable to Russia when it comes to intellectual resources. Countries such as Japan, Germany, and Korea have similar tech-related advantages. But why aren’t they dabbling with crypto as much as Russia does?
Russia has VC, economic deficits
Let’s just say that access to venture capital is easier in other countries, especially in comparison with Russia. To compound the problem, the country is facing economic challenges of constantly changing causes, varying from fuel markets to sanctions and various factors in between.
Now, what happens when there’s a lot of tech talent to go around but not enough funding for their ideas? A lot of the would-be entrepreneurs would need to find alternative sources of funds. The rise of blockchain and cryptocurrencies gave these innovators both a technological platform on which they can execute their ideas and a built-in funding mechanism in the form of ICOs, or initial coin offerings.
But it’s not just the software gurus who are gaining opportunities in the blockchain. Those who know their way around hardware had taken advantage of Russia’s economic realities and characteristics to earn more money.
Russia has cheap electricity
Russia is a major player when it comes to crypto mining. As of the first half of 2018, there are 75,000 crypto mining companies in the country, 15% more than the previous half, according to the Russian Association of Cryptocurrencies and Blockchain. Russia’s cheap and plentiful supply of electricity makes crypto mining a good proposition, come bull or bear.
As a huge natural gas and oil producer, Russia is easily affected by price volatility on these commodities. And while lower fuel prices mean bad news for many sectors of the Russian economy, it translates to better margins for the crypto mining community.
To recap, Russia’s economic challenges drive people to crypto, both through funding opportunities from ICOs and lower costs of production for crypto miners. But what would explain Russia’s hyperactive crypto trading community?
Russia’s crypto regulation policy is still unclear
When it comes to cryptocurrencies, Russian regulators send mixed signals when it comes to its approach to crypto. Last year, there was talk about a government crypto project called CryptoRuble, but it took until November this year to gain progress on the specifics of such a proposal. Over the span of that crawl, the government made statements about the dangers of crypto and proposed some restrictions.
This opaque situation has given leeway for some Russians, many of whom are already crypto project members and/or miners, to dabble in crypto trading. And dabble they did, as shown by numerous surveys ranking Russians as among the most prolific traders.
With this unique set of circumstances, many Russians are heavily involved in many segments of the blockchain ecosystem. It shows with the very active Binance community in Russia, one of our major markets.
In fact, the Binance Russian community is holding its first-ever meetup in Moscow on December 19, at Deworkacy, Bersenevskaya naberezhnaya 6, bld. 3, 6th floor. To our Russian Binancians, please register for the event here.
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