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The price of the Russian crypto market
Material posted: Publication date: 10-02-2022
The Russian crypto market is estimated at $214 billion, or 16.4 trillion rubles, Bloomberg wrote this week, referring to the assessment that the Kremlin and the government use when developing a regulatory plan for the industry. This figure turned out to be at least three times more than the boldest previous estimates.

Trillions in cryptocurrencies

The Russian crypto market is estimated at $214 billion, or 16.4 trillion rubles, Bloomberg wrote this week, referring to the assessment that the Kremlin and the government use when developing a regulatory plan for the industry. This figure turned out to be at least three times more than the boldest previous estimates.

We have read the analytical note prepared for the Government, where this assessment was presented. It says that, according to the analytical platform Coinmarketcap (owned by the largest crypto exchange Binance), the average capitalization of the global cryptocurrency market last year was $ 1.87 trillion, and daily turnover was in the range of $ 50 billion to $ 200 billion. And Russia's share in this market could be at least 12%.

As considered:

  • According to the compilers of the note, the share of Russian users on foreign exchanges is about 10% and reaches 12 million people. This figure was estimated based on the number of unique IP addresses. The share of Russians varies from site to site. For example, on Binance it was estimated at 5.5%, and on EXMO - at 60%. But these calculations did not take into account users who use VPNs, and also exchanges that do not work with Russians directly due to unclear regulation.
  • In addition, Russia is a major player in the over-the-counter cryptocurrency trading market, when an asset is sold directly, and not through an exchange. Russia occupies a leading position in Europe and the second place in the world, the document says. In March 2020, the trading volume in this market reached $20 billion per day. Russia's share in the market of shadow crypto operations in 2020 was 40%, according to Clain analysts. One of the largest platforms in this market is LocalBitcoins. It is blocked in Russia, but in 2020 17.4% of its users were from Russia.
  • 17 million Russians have crypto wallets, the note says, and this is almost 12% of the population (this figure was publicly confirmed by the representative of Deputy Prime Minister Dmitry Chernyshenko). 17 million is slightly more than the number of unique individual clients on the Moscow Exchange and 7.5 times exceeds the number of active clients. Most wallets are in the 25-34 age group, in second place — 35-45 years.
  • According to the authors of the note, more than half a million programmers and engineers are involved in the crypto industry in Russia. And for them, the issue of regulating the crypt is also a matter of principle.

Controversial assessments

The market estimate of $214 billion (16.4 billion rubles) is impressive. This is a third of the capitalization of the Russian stock market and the entire volume of bank deposits Russian citizens. According to the calculations of the compilers of the note, the crypto market could account for about 15% of GDP, which is more than manufacturing and mining.

But this estimate is at odds with most of the other public and non-public figures that the government operates on:

  • For example, in January a letter from Finance Minister Anton Siluanov to Prime Minister Mikhail Mishustin regarding the regulation of the crypto market provides the following figures: 12 million crypto wallets with the ruble equivalent of 2 trillion rubles.
  • Chairman of the State Duma Committee on the Financial Market Anatoly Aksakov in December estimated the investment of Russians in the crypto market at 5 trillion rubles.
  • In November 2021, the Central Bank estimated the annual volume of transactions of Russians with cryptocurrencies at $ 5 billion (about 350 billion rubles at the exchange rate at that time).

Inside the government apparatus, the estimate of 12% of the global crypto market also raised some doubts. The commentary to the note prepared by the analytical center (AC) under the government states that this share can be calculated only for the market of free circulation of cryptocurrencies minus crypto assets in the hands of corporations and states. In addition, we must not forget that part of the cryptocurrency has already been lost. For example, Chainalysis calculated that 2.3-3.7 million bitcoins are now lost, and this reduces the market capitalization of the cryptocurrency by 13-22%. After a series of calculations, AC analysts came to their own conclusion that the share of Russians in the crypto market can be up to 13.3 trillion rubles - this is less than the initial calculations, but not by an order of magnitude.

Golden taxes

Despite different estimates, we can safely say that the cryptocurrency market in Russia is already too big to be easily banned. And most importantly, taxes can be collected from all these trillions. And the government is already calculating their volume.

The same analytical note says that even with a simplified taxation system, the amount of taxes collected from the industry can be up to 1 trillion rubles per year. It is very difficult to calculate the exact turnover of transactions with cryptocurrencies in Russia, but there are some public estimates. For example, at the end of the year, RAKIB believed that the annual turnover of the Russian market segment was about 450 trillion rubles. And in Xainalysis, it was estimated that in 2020, Russian users sold and bought cryptocurrencies for about $ 16 billion. Thus, even at a simplified rate of 6%, tax collections can range from 146 billion rubles to 1 trillion rubles.

However, the AC believes that it would be wrong to consider the tax base in this way. According to the calculations of the center's experts, the taxes that can be collected from the crypto market can be divided into those that will be levied on legal entities - exchanges and intermediaries, and those that will need to be paid from income on investments. From legal crypto exchanges, according to the calculations of the center, the state could receive from 90 to 180 billion rubles a year (depending on the tax rate). And taxes on income from investing in cryptocurrencies could bring up to 606 billion rubles to the budget - if the market grows at the same pace as in previous years.

Preferential mining

After the ban on mining in China , Russia became the third country in the world in bitcoin mining, and computing power in the country has reached 11% of the global total. Perhaps the balance of power will change soon, because miners began to leave Kazakhstan, which was in second place, even before the January protests due to problems with electricity. In ether mining, Russian capacities are also in high positions: up to 14% of the global ones (according to the same analytical note). The annual revenue of all miners from Russia for 2021 could amount to $ 4.5 billion, or 333 billion rubles, the document says.

But there is very little public information about major Russian miners. They rarely formalize their activities in any way or publicly disclose what they are doing. Large players, as a rule, have informal agreements with the electric grid and pay at preferential rates for electricity or do not pay for it at all, according to two miners. In addition, there are entire regions in Russia where almost the entire population is engaged in mining — for example, the Irkutsk region. Plus, the region has low electricity tariffs, which make mining at home economically feasible. As a result, local power supply companies are hunting on illegal miners with thermal imagers. And in general, electricity consumption in the region in 2021 increased fourfold due to mining.

What's next?

Given the scale of the market, which is now seen more clearly, the authorities really have something to fight for. And we can definitely say that the initial plan of the Central Bank to ban both cryptocurrencies and mining is unlikely to be feasible.

Now the government is leaning more towards the position of the Ministry of Finance, which advocates regulation instead of prohibition, Kommersant wrote. The materials on the results of the meeting with Deputy Prime Minister Dmitry Grigorenko, which The Bell has, say that by February 11, the Central Bank and all interested departments, including the FSB, should prepare draft scenarios for regulating the cryptocurrency market, taking into account all risks. The Central Bank's position was not supported in the Duma either: the head of the Financial market Committee Anatoly Aksakov and the first deputy chairman of the Security and Anti-Corruption Committee Andrei Lugovoy said that none of the participants supported the Central Bank's position at the working groups. The State Duma Committee on Economic Policy, in its comments on the position of the Central Bank, also concluded that it is more appropriate to regulate the use of financial infrastructure for the circulation of cryptocurrencies than to prohibit it.

Vladimir Putin's position is not completely clear, but it will depend on which version of regulation will eventually win. The president has already spoken publicly about the competitive advantages that Russia has in mining, so there is little chance of a complete ban on the crypto market.

Valeria Pozychanyuk

Source: The Price of the Russian Crypto Market - Telegraph 

Tags: Russia , finances

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