Russia legalizes cryptocurrency mining in the country

Putin signed the law that allows Russian legal entities to carry out mining

Many still think that Russia is far from the rest of the world. This is because of the actions of the government, the president, and other influential people in Russia. There are particular problems with the country, which has been named a terroristic state and an aggressor. However, with the recent changes in the cryptocurrency industry, Russia might step closer to the West now^[1].

Russian President Vladimir Putin has signed a new law that legalizes cryptocurrency mining in the country, marking a significant step in Russia’s digital finance landscape. This law, effective 10 days after its official publication, allows only Russian legal entities and registered individual entrepreneurs to engage in cryptocurrency mining—a process crucial for generating new coins and verifying transactions.

However, individuals who keep their energy consumption within government-set limits can mine digital currency without registering. The law also includes measures to curb money laundering through digital currencies to prevent potential misuse.

In addition to the cryptocurrency law, Putin has signed other legislative measures, including a ban on drug advertisements on the internet and media and regulations to identify and restrict organizations linked to foreign government agencies deemed undesirable in Russia.

Despite these developments, Russia's existing ban on cryptocurrency payments remains in place.

A way to be closer to the West and less dependent on the West

Russia has been involved in the war against Ukraine for a few years already. Due to the aggression against another country in Europe and failure to talk peace, other countries posed sanctions on Russia. This has created issues with the economy of the country.

Russia's decision to legalize cryptocurrency mining is part of its strategy to handle the economic challenges of Western sanctions. The Central Bank has noted that delays in payment processing led to an 8% drop in Russian imports in the second quarter of 2024.

These payment delays are largely due to the reliance on the international SWIFT system, which uses dollars and euros. This system has put Russia's trading partners at risk of facing additional sanctions, leading them to be more cautious. In response, Russia is increasingly using digital assets to overcome these obstacles, aligning with the BRICS group's growing interest in creating its own digital currency^[2].

This move is also part of Russia's larger plan to reduce its reliance on the U.S. dollar and build an alternative financial system with BRICS, a group that includes big economies like China and India. The decision has strengthened Russia's trade relationships with countries like El Salvador and has important implications for its dealings with China and the UAE. Russia and China are using digital assets more often for international payments, using platforms like Qifa to simplify transactions and avoid U.S. sanctions.

The BRICS group is likely to speed up the development of digital currencies and payment systems, which could change the global economic landscape and challenge traditional financial systems. This focus on digital finance highlights the group's goal to strengthen its role in the global economy^[3].

Crypto mining: a journey into digital gold

Cryptocurrency mining might seem complicated, but it's actually a key process that keeps digital currencies like Bitcoin and Ethereum running. Mining has become an important part of modern finance, affecting economies and sparking discussions about its environmental and financial impact.

Bitcoin was the first cryptocurrency, launched in 2009 by Satoshi Nakamoto. The goal was to create a digital currency that could be used without banks or other traditional financial institutions.

Mining in the crypto world is a bit like mining for gold. Just as gold is dug up from the ground, cryptocurrencies are "mined" through a process using computers. In Bitcoin’s early days, anyone could mine it with a regular computer. Those who started early were rewarded with coins that were once worth very little but later made them millionaires as Bitcoin’s value soared.

Crypto mining is how new cryptocurrency units are created and added to circulation. Unlike regular money, which is controlled by governments or banks, cryptocurrencies are managed by a network of computers spread across the world.

Mining plays several key roles in the cryptocurrency world. It secures the network, making it harder for anyone to tamper with it. The more miners there are, the safer the system becomes, increasing trust in the currency.

Mining also keeps cryptocurrencies decentralized. Since no single person or group controls the network, it’s harder for governments or other powerful entities to interfere. Finally, mining controls the flow of new coins into the market. This helps manage inflation, keeping the currency's value steady over time.