‘Bitcoin a matter of national security’ – Mara’s CEO after Russia mined $3B

As a seasoned researcher with a keen interest in global financial systems and their interplay with geopolitics, I find this ongoing battle between Russia and the United States in the crypto space intriguing. While both nations are leveraging the potential of digital currencies to mitigate economic challenges, their approaches couldn’t be more different.

Today, Fred Thiel, the CEO of Bitcoin mining company Mara, has been making headlines following his assertion that cryptocurrency mining and strategic bitcoin reserves are crucial matters of national security. This statement came in response to news about Russia mining approximately $3 billion worth of Bitcoin last year, amid ongoing Western sanctions.

It’s evident that the topic of Bitcoin has become crucial for national security matters, encompassing not only Bitcoin mining activities but also the strategic accumulation of reserves. Last year alone, Russia reportedly generated approximately $3 billion from Bitcoin mining, even under the constraints of existing sanctions.

U.S vs Russia in the crypto space

As reported by Russian news outlet Izvestia, Sergey Bezdelov, Director of Russia’s Industrial Mining Association, disclosed during a mining meeting on Wednesday that the mentioned details were shared. Moreover, he pointed out that the government amassed approximately $555 million in taxes from Bitcoin mining taxes in the year 2023. In simpler terms, the government received a significant amount of revenue due to taxes on Bitcoin mining activities in the year 2023.

In the year 2023, approximately 54,000 Bitcoins were mined within Russia’s borders. Based on our calculations, this activity is projected to generate an additional 50 billion rubles in annual tax revenue. Currently, a law is being proposed for balanced regulation of this sector, considering the current market conditions. With this new legislation, we anticipate an influx of new investors.

Although this figure is less than 1% of Russia’s $2.27 trillion GDP (Gross Domestic Product), it points to a remarkable tax revenue source. Especially given the country’s economic woes following Western sanctions.

As an analyst, I’m pleased to note that, despite facing regulatory hurdles, the United States has made significant strides after the endorsement of Spot ETFs for Bitcoin and Ethereum [ETH]. Notably, during his campaign, Donald Trump expressed his intent to establish a national strategic reserve for Bitcoin if he were elected President. Furthermore, he reiterated his dedication to positioning the U.S as the global leader in Bitcoin and cryptocurrency.

Instead, it’s worth noting that Russia has taken a different approach lately by enacting laws related to cryptocurrency mining and setting up an experimental structure for global commerce using digital currencies. In August, they publicly announced their intentions to develop stablecoins tied to the Chinese Yuan and BRICS currencies as part of this ambitious plan involving crypto.

Russia’s crypto plan and its obstacles

Furthermore, it set up two cryptocurrency exchanges in St. Petersburg and Moscow for specific companies and individuals to execute transactions and settlements using cryptocurrencies as an option. This shift towards cryptocurrency is the nation’s response to sanctions imposed by the West, which allegedly impacted its economy due to delays in international payments and trade.

In essence, based on a recent report by Chainalysis, it’s possible that the Russian government may be making use of crypto exchanges like Exved and Garantex to bypass international sanctions. Nevertheless, the company highlighted potential hurdles for extensive usage at both national and global levels, including the possibility of sanctions being imposed on related digital wallet addresses.

Part of the report read,

It’s extremely unlikely for large-scale circumvention of on-chain sanctions by Russia, considering their total foreign exchange reserves are approximately half a trillion dollars… Wallet addresses linked to cryptocurrency exchanges, mining operations, and other on-chain actors can be pinpointed, traced back, and possibly subjected to sanctions.

It’s yet unclear how Russia will maneuver through these obstacles while striving to surpass crypto mining dominance held by the United States.

2024-09-08 00:08

U.S vs Russia in the crypto space

Russia’s crypto plan and its obstacles

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