Russia's Central Bank Governor, Elvira Nabiullina, recently announced that Russia is conducting experimental research to use cryptocurrencies in international payments. More importantly, she revealed that they are working on a special permit that will allow state-connected organizations to mine cryptocurrencies abroad. However, with plenty of available space, cheap electricity, and labor in Russia, why is the country choosing to establish these facilities abroad?
In the first quarter of this year, Russia rose to second place among the countries where Bitcoin is mined the most. So, why would Russia set up facilities abroad when there is ample space, cheap electricity, and labor available domestically? It is hard to believe that a green approach was taken in the establishment of these facilities. Additionally, why is a special permit being granted only to state-connected organizations?
In fact, Russia's cryptocurrency mining abroad means creating Bitcoin pools in different countries. Suppose a facility established in a country earns 100 million USD worth of Bitcoin over time. The Bitcoin held by the facility will allow for insurances worth up to 100 million USD in trade between the country where the facility is located and Russia.
For instance, Russia has created Bitcoin pools in several countries. In this case, these countries will become new "trusted" centers, much like how gold is held in the US and the UK. The US, being the largest Bitcoin-producing country, can use its Bitcoin miners to control the market if such an innovative transition occurs. This ensures that the US maintains its current position over gold.
Russia's cryptocurrency mining abroad signals a change in Bitcoin-based insurance and collateral. Typically, governments secure loans or large-scale commercial transactions using assets such as gold, government bonds, or hard assets. However, Russia plans to change this by using Bitcoin as an insurance and collateral tool.
The reason for granting special permits to state-connected organizations is that they are usually associated with the government and can provide more security in international payments. Moreover, if the government mines Bitcoin, the country could become more effective in the Bitcoin market.
