So
Their central bank has been considering an outright ban
on crypto, and their second richest man, presumably seen
here, has a scheme to displace it entirely.
This is because they should be
worried, very worried about crypto.
Both of these actions would have major
ramifications on the price of crypto.
But Russia is gonna Russia.
Since the war in Ukraine, there's been pressure on
major exchanges like Coinbase and Kraken to block all
wallet addresses in the former Soviet state.
So why would we want to block something
that a country is already considering blocking?
Add that to the bizarre Bitcoin rally that occurred
after sanctions on Russia were enacted, and you have
a bit of mystery here as to who crypto
helps and who it hurts during wartime.
The answer, which might surprise you.
So let's unpack this by going back in time
to a few weeks ago, when the bank of
Russia announced it had approved the first issuer of
Digital asset backed tokens to a company called Atomyze, which
sounds a lot like an Antman villain.
But okay.
Following the announcement, Russian oligarch Vladimir Potanin,
presumably seen here, said that these tokens,
essentially NFTs tied to real world assets
like precious metals and real estate, would
displace the crypto industry entirely, and Atomyze
would use blockchain technology to do it.
I wanted to understand more about
the scope of his claims, because
Now, there are plenty of projects who have
created NFTs tied to real world goodies.
But Potanin is the second richest man in Russia,
and his private investment firm Interros, which sounds
like a Captain America villain, holds majority stakes in
metals, energy, finance, real estate and other industries that
make up the backbone of Russia's economy.
He has a lot of pull.
He could hypothetically dual wield Interros' industrial assets
and Atomyze to corner Russian retail investors.
Much like China, Russia has this
weird love-hate relationship with crypto.
In January, the central bank proposed an
outright ban on mining and transactions, but
then regulators have also proposed regulations and
taxation to capitalize on the trend instead.
Putin himself isn't against Russians owning and
using crypto and wants to find a compromise,
which by my estimation, is the first time
he's ever wanted one of those.
But I don't want to say that this is good news exactly.
All bets are off at this point, but
taking Russia out of the equation would starve
the market of billions in crypto transactions annually,
and an outright ban would eliminate the third
largest Bitcoin mining country in the world.
That would be like starting a company that
manufactures diabetes and then banning the United States.
It doesn't make sense.
And it's a little ironic that without the ban
on crypto, Russia is in a better position than
most other countries to benefit from its actual success.
But an oligarch like Potanin, one of many that are
in the Kremlin's pocket, seems to have a lot of
incentive to take Russian retail investing and point it squarely
at the businesses of the top 1%.
And there's a precedent for all of this.
When China banned crypto in the middle of last
year, Bitcoin's price only dropped by about 6%.
Before that, it was home to
over 50% of all mining activities.
That didn't hurt the market as
much as some thought it would.
So Russia exiting in the industry probably wouldn't
end up doing very much long term damage.
The fact is that sanctions against Russia have put a
ban on crypto almost completely out of the question.
This is a double edged sword for Putin.
The Russian ruble has fallen to almost half
of its value in just over a week.
Just picture, that half of your money gone.
And unfortunately for many citizens of the country, many
of whom opposed the war, crypto is a last
resort for any savings to be salvaged.
And the pro-government cronies running the majority of
Russian businesses are being hit the hardest.
Despite crypto exchanges like Coinbase and Kraken
refusing to block all wallet addresses in
Russia, the US government is working with
them to prevent blacklisted businesses and individuals
from using crypto to dodge sanctions.
The aftermath brought about by Putin's war of choice
inadvertently has given regular people in Russia something of
an upper hand, if you can call it that.
I mean, they're not celebrating the street about it.
They're not like we live in a tyrannical
oligarchy run by this power-mad shirtless horse rider,
and we're on the brink of nuclear war.
But at least we got the upper hand in crypto.
But as crypto exchanges have become the
last area of the financial system that
hasn't collapsed, regular people are buying in
and regime fundraisers are getting blocked out.
I'll explain why Russia should be really worried.
But first, the topic of war.
The sanctions imposed on Russia haven't stopped Putin
from pressing on with the invasion of Ukraine.
He's like a Black Friday shopper.
You can put up barriers, but you bet he's
going to try and get that flat screen TV.
Some analysts have pointed out that Russia actually
did change their plans accordingly after anticipating that
sanctions were coming, which not rocket science.
If you decide to invade another nation, there
will probably be consequences, unless you're Saudi Arabia.
So in a nutshell, Putin leveraged the country's massive oil
and gas industry to create this stockpile of foreign currency
that could be used to buy back the ruble and
battle the sale pressure created by sanctions.
But that didn't work.
As part of the increasingly more severe sanctions, Russia
has also been frozen out of their international reserves,
60% of which are in US dollars.
So there's a growing concern that without access to
foreign money, Russia could instead find ways to fund
the weakening war effort through crypto sources.
But that doesn't mean that if you've been
buying the dip no, sorry, not that dip
you're voting [?] on the war with Ukraine.
Crypto is more difficult to trace compared
to money that goes through traditional banking
systems, but it's not impossible.
They could use the same crypto forensics that
led to the DOJ seizing billions in Bitcoin,
taking down TikTok, Bonnie and Clyde.
They could use those same forensics to figure out
who is sending money to sanction Russian addresses.
And if all else fails, they
could probably just have Coffeezilla figure this all out.
Cut to this end, Coinbase, Kraken, FTX and many other
exchanges have in the last week committed to helping
the US freeze out the Russian elite.
Ray Dalio, the founder of the world's largest
hedge fund, Bridgewater Associates, recently posted a video
on how empires rise and fall, effectively changing,
sometimes very quickly and sometimes very violently, which
nation rules all others.
I found it fascinating.
He discusses how the longevity of some of
the biggest empires in the last 500 years
have all gone through the same pattern of
achieving global dominance, but inevitably losing it.
I know, right?
I've played risk before, but what's interesting about this is
that he talks about some health indicators that tell us
how good or bad an empire is doing.
And one sign of collapse is an
increasing disparity between rich and poor, which
apparently happens again and again when a
more powerful economy keeps getting more powerful.
Those who are in charge make off with the
profits of global trade, while wages remain stagnant.
I know, right?
I've played monopoly.
So unless peaceful methods of redistribution happened, like
the New Deal in 1933, the end result
seems to always be a violent regime change.
Russia, though not the dominant global power it once
was, has struggled with a growing wealth gap.
Like 500 people rule Russia, as has the Netherlands
and Sweden and the USA, and Thailand, and Brazil
and Denmark and the Philippines and India.
It's almost as if the whole world is unequal.
But in Russia, it's actually one of the main reasons
the government proposed to ban crypto earlier this year.
Russia is a notorious country for cracking
down on political dissent, labeling opposition to
the Putin regime as undesirable organizations.
It turns out that of the $92 billion
in crypto assets currently in Russian wallets, a
growing fraction of this is being used to
fund opposition and independent media.
Today, Russian media has been barred from
citing any other sources in their reporting,
apart from the government itself.
But now that the war cats out of the bag,
well, putting a gag on crypto would be a death
sentence to their economy or what's left of it.
Now, it's not a guarantee that this will
all end in a civil war within Russia
like we see in Ray Dalio's examples.
But with the ruble in freefall and sanctions
stopping anyone in the oligarchy from turning this
crisis around, crypto will do more for the
average Russian person than it will the autocracy.
Once upon a time, Vladimir Putin could have
convinced you that his company's new digital assets
would become more valuable than Bitcoin, but his
countrymen have proved him wrong.
On the back of this insane war, crypto is
one of the last financial systems that all Russians
and Ukrainians are relying on for the future.
In Russian Ukraine, private citizens have turned to crypto as
this kind of safe haven against the pressures that war
has put on their currency and their savings.
This is why Russia should be worried.
The thing empowering their citizens and Ukrainians most
is the same thing that they need to
attempt to use to curb sanctions.
This one tweet perfectly summarizes the situation.
When your centralized financial system collapses, your best
bet is having money in decentralized assets.
So during wartime, the citizens in Russia and
Ukraine need crypto now more than ever.
And we're in a better spot than ever to make
sure that crypto helps those who need it and hinders
those who want to exploit it for political dominance.