Russia is planning to expand its bitcoin-mining industry to rival China as the world's largest mining market, according to Bloomberg reports.
Bitcoin consultants warn that if Russia looks at regulating Bitcoin, this could potentially affect the price and widespread support for Bitcoin within the investing community. It is also important to note that Russia does not see Bitcoin as a currency but as a digital asset.
Another huge announcement involves Bitcoin company Russian Miner Coin (RMC), which is hoping to is raise $100 million in an initial coin offering (ICO) and in turn promising buyers a right to 18% of the company's mining revenue.
Michael Parsons, a bitcoin entrepreneur at the UK Digital Currency Association, explains the Russian authorities have been trying over the years to ban bitcoin. But this view softened over the last year or so, hence movements from RMC and others. That's, in part, a result of a shift in how Bitcoin is viewed.
"Earlier this year, Elvira Nabiullina, governor of the Russian Central Bank, explained that she views bitcoin as a digital asset rather than a virtual currency, and this is how Bitcoin should be thought about with regards to future regulation," Parsons said.
It is expected Russia will rival China -- but how exactly will Russian Bitcoin mining impact the space?
"By moving into Bitcoin mining, Russia would support the mining decentralization of Bitcoin, providing an additional significant Bitcoin mining participation to balance the mining by other large groups and mining pools especially the large bitcoin mining farms concentrated in China," Parsons said.
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"Then, by accumulating bitcoin through its own mining, Russia may also consider bitcoin to be recognized as a potential reserve digital currency," he added. "And, if Russia looked at regulating bitcoin, this could potentially affect the price and support for bitcoin."
Currencies have a geopolitical impact.
"As cryptocurrencies create a new asset class that does not depend on any government, it makes sense for governments to try to enter that space," said a Bitcoin expert who requested anonymity. "Currency and payment systems have a geopolitical impact. For instance, at end of 2014 Visa and Mastercard suspended operations in Crimea following U.S. sanctions."
The source explained that BCash can be seen as a Chinese version of Bitcoin, and RMC a Russian version of Bitcoin.
The Bank of England has also studied a national blockchain. Promoting local champions is also a good strategy to develop skills and competencies that may become critical in the future.
"Governments can also invest into large industry players through venture capital funds and influence the industry through regulation," the source added. "The European Union fourth AML directive defines new rules for crypto currency custodians."
In the beginning, RMC is expected to rely on Bitfury chips. Bitfury is a company that manufactures mining equipment and also operates its own mining operations, was founded by Valery Vavilov, a Russian-speaking native of Latvia.
"In the case of RMC, the partnership with Bitfury, a large and well established Bitcoin miner operating in 18 countries, is significant," the source said. "RMC will be able to get to market much faster by using BitFury data centers and technology, while developing its own homemade mining equipment. It is not clear why Bitfury is selling these profitable Bitcoin mining assets."
For those looking to keep track of Bitcoin's price trajectory, Russia will inevitably be an essential piece of the puzzle.
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Editors' pick: Originally published August 11.