Russia and the Bitcoin solution

Cointribune has interviewed Anti Danilevski. He is the CEO of Kickex, an exchange operating in Russia. We talked about the western sanctions over Russia, the BRICS and what is in store for bitcoin.

How big is Bitcoin in Russia ?

Bitcoin mining in Russia is significant, with the country ranking second globally in energy consumption dedicated to this activity. Major government entities have partnered with certain mining companies (specific names omitted for discretion), utilizing their resources for mining operations. As a result, the industry is substantial, and by 2025, it’s expected to grow even more.

Is it fair to say that around 12 % of the bitcoin hashrate comes from Russia ?

No, actual Russia hashrate is 17 %. But don’t forget that a lot of Russian miners have companies in UAE or Hong Kong, and they are renting hash power from their own companies in Russia. So, the real hashrate (in my opinion) is about 23-25%, and it will grow, since Russia has legalized mining. I expect a lot of Chinese miners to move to Russia soon.

What about paying in bitcoin or owning bitcoin ?

I’m not sure how many people here own BTC, nobody really knows it. I think it’s about 4-4.5m holders, to be compared with a total population of 150 millions russians. About paying with BTC, it’s barely a case due to its volatility.

The West has disconnected Russia from the Swift network. Has this sparked a widespread revival of interest in Bitcoin?

In Russia, while there is significant adoption of cryptocurrencies in general, the number of people specifically holding Bitcoin is harder to pinpoint accurately. The widespread use of crypto in Russia is largely driven by the need to transfer money overseas due to sanctions and the challenges posed by international financial restrictions. Many Russians, particularly IT specialists and their families living abroad in countries like Thailand or Bali, have turned to cryptocurrencies as a reliable means of sending and receiving money.

This necessity has led to an unprecedented level of crypto adoption in Russia, with millions becoming familiar with and using various digital currencies. However, not all of these users are focused solely on Bitcoin. Many utilize a variety of cryptocurrencies for their transactions, of course preferring stable coins over BTC.

Sanctions have had just a crazy positive impact on Russia. It’s not just about crypto—it’s about everything: software, hardware, factories being restored, and more. Starting from the 1980s, the Russian government under Gorbachev and Yeltsin decided to rely heavily on imports, which led to the destruction of almost all domestic industries. Russia became import-dependent, relying on other countries for almost everything.

Sanctions have opened many eyes, and in just 2-3 years, we’ve seen an incredible boost in import substitution that’s hard to believe. The growth in crypto adoption and the development of related legislation are just some outcomes of this shift.

It has also strengthened ties within the BRICS. Russia has taken the presidency of the group this year. What should we expect from the Kazan meeting in october regarding the international monetary system ?

BRICS is working on its own payment system, and they believe they’ll create a SWIFT replacement. They also may announce a BRICS currency (work title is GDR). But there is already a SWIFT alternative in Russia, and worldwide banks aren’t implementing it because they would lose USD correspondent accounts if they do.

So I expect nothing really new. Everything is already known, and building it will take years.

Do you think bitcoin is being discussed and taken seriously among the BRICS ?

Not by central banks. Not because it’s “bad”, but rather because of its volatility. It’s impossible to do intentional deals in BTC for “serious” companies.

Bitcoin is indeed too volatile to price contracts in it. But why private banks could not use bitcoin as an international payment system ?

Because their contracts are in $ or RUB, or Yuan. Imagine you have bought 10 BTC for $600k, sent it and an hour later it’s $500k. And you have to send $100k more. Those risks are unacceptable for big companies.

What price must bitcoin reach for its volatility to become acceptable? The Bank of Russia recently launched an experimental payments platform using cryptocurrencies to circumvent sanctions. Which cryptocurrencies will be used ?

Don’t think it will ever become acceptable, it will always remain volatile. For payments, only stable coins would work.

There is a chance that lightning BTC could be used if conversions fiat – BTC – fiat would be really fast and with a fixed, predefined exchange rate.

So there is a way. Is the Lightning Network something being tested by the Russian central bank to allow some companies to pay their importations or receive payment for their exportations ?

No, they don’t know what lightning is. That’s for sure. For them there is no difference, BTC is BTC.

Russia recently resumed its gold purchases. Is a gold-backed stablecoin the most popular option being considered to compete with the dollar ?

Stablecoin in Russia is being discussed in theory. In practice, there is no law about stablecoins yet. I’ve been on a conference yesterday, we were talking with one of the ministers of finance of Russia about it. It is being considered to regulate, but when and if it will happen – nobody knows yet.

I’ve said that it is unavoidable: Tether will keep freezing wallets of sanctioned companies and BTC is too volatile. Russian international trading in US stablecoins is VERY risky. Russia needs its own stablecoin and they have agreed to my point.

I’ll be visiting our Central Bank this or next week and we’ll talk about it again. Maybe I’ll manage to push it forward, we’ll see.

So, you are somehow advocating for international transactions in bitcoin, through the Lightning Network, and settled immediately in ruble stablecoin to avoid the volatility problem, right ?

Kind of, yes.

Bitcoin is not just a permissionless payment system, it’s also a store of value. Donald Trump seems to be willing to back the US Dollar with it. Should we expect Russia and China to follow suit ?

In my humble opinion, 0% chance for it.

Why not since they are already buying gold and other precious metals to beef up their reserves ?

They understand gold, but not crypto, and they are very afraid of volatility. Also, as one of the deputies in Duma said, “internet is developed in the USA, so it’s dangerous and we shall not use any currency that is being controlled by the USA”. Don’t tell me about it…

Thank you for your time M. Danilevski. Finally, could you tell us what could be in your opinion the bitcoin best case scenario for the next 5 years ?

It’s very hard to predict, but I believe it would grow significantly. Recent halving will start kicking in soon, and in 3.5 years we’ll have another halving. So I’m looking for BTC price at about $200-$250k. I think that BTC is the best anti-inflation long-term asset. It will be used more and more as a way to store value and kept safe. Everyone here is now asking how to buy crypto-currencies, those who had never thought of it before. So we’re at the very beginning, and adoption hasn’t started yet.