Part of a series of deeper dives on BRICS members to see their individual economic and political trends to try to imagine how they will move forward on crypto and how this may affect the BRICS perspective on crypto.
Historical Background – Vikings, Mongols, serfdom, communism, Russia Today :
Russian history can be divided into several key phases, each with its own economic system and dominant economic output:
Kievan Rus (9th-13th centuries): In the early years, Kievan Rus was a loose federation of city-states. The economy was centered around agriculture, trade, and craftsmanship. While it had elements of centralization under the Varangian rulers, it remained predominantly decentralized.
Mongol Rule (13th-15th centuries): The Mongol Empire’s invasion in the 13th century subjected Russia to a period of economic and political subjugation. The Mongols imposed a tribute system, extracting resources and wealth from Russia. This era saw limited centralized economic control.
Serfdom and the Russian Empire (16th-19th centuries): Under the Romanov dynasty, Russia introduced serfdom, which bound peasants to the land. The economic system was highly centralized, with the state controlling vast landholdings and resources. Agriculture, especially grain production, became the main economic output, supporting both internal consumption and exports.
The USSR (1922-1991): The Soviet Union, led by a communist government, implemented a centrally planned economy. The state controlled all aspects of production and distribution. Heavy industry, arms production, and energy were emphasized, with a focus on military and industrial power. This centralized system led to inefficiencies and shortages, but it also allowed for rapid industrialization.
Putin’s Russia (2000s-present): After the collapse of the USSR, Russia transitioned to a mixed economy. While there is more room for private enterprise, key sectors like energy (oil and natural gas) remain under state influence. Russia’s economic output is heavily reliant on energy exports, making it vulnerable to global energy prices and fluctuations. The government, under President Vladimir Putin, maintains significant control over key industries and exerts influence on the overall economy.
Throughout its history, the degree of centralization in Russia’s economic system has varied widely, ranging from decentralized feudalism to highly centralized planned economies. Economic outputs have also evolved, from agriculture to heavy industry to energy resources, reflecting the changing priorities and circumstances of each historical phase.
Russia – An Emerging Economy with a Highly Industrialized Past
While the Soviet Union produced immense amounts of industrial output, the empire before it and the Federation afterwards did not come close to that amount of output.
Average yearly steel production:
According to the World Bank, Russia’s industrial output (excluding construction) grew at an average annual rate of 7.5% from 1992 to 2008. However, it declined by an average annual rate of 2.6% from 2008 to 2018.
The decline in industrial output was due to a number of factors, including the global financial crisis of 2008, the sanctions imposed on Russia by the West in 2014, and the COVID-19 pandemic in 2020.
Despite the decline in industrial output, Russia remains a major industrial power. In 2020, Russia was the world’s 11th largest industrial producer, with a total industrial output of $1.6 trillion.
Gas and oil are included in this industrial output, somewhat giving a more industrial aspect than reality. Russia was a top 10 economy from the 1500s onwards due to its population and abundance of raw materials and agricultural output. While being a top 5 industrial country with cutting edge technology providing many emerging economies with industrial products during the Soviet period, Russia has declined drastically in industrial and R&D capability since the dissolution of the Soviet empire. Since the 2000s there has been an attempt to recentralize and nationalize many heavy industries such as aerospace. Russia built some of the most amazing ships, vehicles, and planes and helicopters the world had ever seen. On the other hand Russia was far behind Western countries in terms of computer hardware research and production or other more advanced industrial output.
Today’s Russian exports are made up almost exclusively of raw materials; mostly Oil and Gas, and then Coal, Gold, Platinum, Wheat, and Wood.
Russia imports what you would expect an emerging economy to import. Cars, medicine, broadcasting equipment, and other higher tech goods.
Russia’s Trade Partners: BRICS, the West or the CIS?
Russian exports are mostly to Europe, China, and the US before the current invasion of Ukraine and the following sanctions. Most exports go to China (BRICS), the Netherlands, US, UK, Italy, from the West, Belarus (nearly an autonomous republic of Russia in essence, a CIS member), Turkey, and Germany, Kazakhstan, a CIS member.
Most of Russia’s income comes from China and the West. Its own economic organization has lost a lot of importance since Ukraine left it in 2014 to move closer to the EU.
The main countries Russia depended on for imports before the 2022 sanctions were China for 25% of its imports and then Europe with Germany in the lead. Now Russia has turned to China for most exports and imports with a growing trade connection to India for selling oil and gas. Russia is now dependent on China as its main trade partner for buying its raw materials and providing the country with almost anything more advanced than basic raw materials. From electronics to medicine to spare parts for daily appliances and vehicles.
What does all of this have to do with Crypto?
Russia has seen centralization of its economy grow to extremes in the past, with more or less extreme versions since the Golden Horde was overthrown. The end of the Soviet Union saw some reversal during the Yeltsin years. But centralization of information, political power, and economic power around Putin’s personal circle has become more and more visible since 2000, with a drastic rise about every 5 years. It is now inevitable that all decisions are made by that inner circle. If someone doesn’t follow the circle they are removed and replaced no matter how important they seem to be.
Expect anything that can’t be used in an exclusive way to reinforce the income and power of the top inner circle to be banned or regulated in a way to make it fit for that use.
The CBR’s stance was met with opposition from some members of the government, who argued that cryptocurrencies could be a useful tool for innovation and investment. In 2018, the Ministry of Finance proposed a more lenient regulatory framework for cryptocurrencies, which would have allowed them to be used for investment purposes.
However, the CBR continued to oppose the use of cryptocurrencies, and in 2020, it banned cryptocurrency mining in Russia. The ban was motivated by concerns about the environmental impact of cryptocurrency mining and the potential for cryptocurrencies to be used for illegal activities.
In 2021, the Russian government introduced a new law on cryptocurrencies that legalized cryptocurrency transactions but prohibited their use as payments for goods and services. The law also required cryptocurrency exchanges and miners to register with the government and to comply with certain regulations.
The new law was seen as a compromise between the CBR and the Ministry of Finance, and it was welcomed by some members of the cryptocurrency community. However, others argued that the law was too restrictive and that it would stifle the development of the cryptocurrency industry in Russia.
Since Russia’s invasion of Ukraine started a long list of sanctions
The future of cryptocurrency regulation in Russia is uncertain. The CBR has continued to express its opposition to cryptocurrencies, and it is possible that the government could introduce even stricter regulations in the future. However, the Ministry of Finance has also said that it is open to the idea of further developing the cryptocurrency industry in Russia.
Russian developers that can build amazing blockchain related technological projects are very numerous. Almost every blockchain project on earth boasts at least one Russian developer somewhere in its development history. But this aspect of the Russian economy is at the mercy of political centralization. Developers have left the country to emigrate to countries where they can continue to innovate. A trend that’s been ongoing in Russia’s history of fleeing minds for at least 200 years.
Digital Ruble
The history of CBDC regulation in Russia is still in its early stages. The Central Bank of Russia (CBR) first announced its plans to develop a CBDC in 2020. The CBR has been conducting research and development on CBDC since then, and it has published a number of white papers on the topic.
In 2022, the CBR introduced a regulatory bill for CBDCs. The bill was approved by the Russian parliament in July 2023. The law allows the CBR to issue a CBDC, and it also regulates the use of CBDCs by businesses and individuals.
The CBR has said that it plans to launch the digital ruble in 2025. However, the exact timeline for the launch is still uncertain.
The CBR’s approach to CBDC regulation has been cautious. The bank has been reluctant to adopt a laissez-faire approach, and it has expressed concerns about the potential risks of CBDCs, such as the possibility of money laundering and terrorist financing.
The CBR’s regulatory approach has been met with mixed reactions. Some people have welcomed the bank’s cautious approach, while others have argued that it is too restrictive. It is still too early to say what the ultimate impact of the CBR’s regulatory approach will be.
Here are some of the key features of the Russian CBDC regulation:
- The digital ruble will be issued by the CBR.
- The digital ruble will be a legal tender in Russia.
- The digital ruble will be accessible to businesses and individuals.
- The use of the digital ruble will be regulated by the CBR.
- The CBR will have the power to freeze or seize digital ruble accounts.
The Russian CBDC regulation is still in its early stages, and it is possible that the law could be amended in the future. However, the law provides a framework for the development and use of the digital ruble in Russia.
For trade graphs:
Russia: The BRICS BearThe BRICS Bear – How does Russia’s history influence its vision of crypto?Part of a series of deeper dives on BRICS members to see their individual economic and political trends to try to imagine how they will move forward on crypto and how this may affect the BRICS perspective on crypto.Today, we focus on Russia in BRICS, often called the “Bear” or sometimes the “Snow Leopard”. Historical Background – Vikings, Mongols, serfdom, communism, Russia Today :Russian history can be divided into several key phases, each with its own economic system and dominant economic output:Kievan Rus (9th-13th centuries): In the early years, Kievan Rus was a loose federation of city-states. The economy was centered around agriculture, trade, and craftsmanship. While it had elements of centralization under the Varangian rulers, it remained predominantly decentralized.Mongol Rule (13th-15th centuries): The Mongol Empire’s invasion in the 13th century subjected Russia to a period of economic and political subjugation. The Mongols imposed a tribute system, extracting resources and wealth from Russia. This era saw limited centralized economic control.Serfdom and the Russian Empire (16th-19th centuries): Under the Romanov dynasty, Russia introduced serfdom, which bound peasants to the land. The economic system was highly centralized, with the state controlling vast landholdings and resources. Agriculture, especially grain production, became the main economic output, supporting both internal consumption and exports.The USSR (1922-1991): The Soviet Union, led by a communist government, implemented a centrally planned economy. The state controlled all aspects of production and distribution. Heavy industry, arms production, and energy were emphasized, with a focus on military and industrial power. This centralized system led to inefficiencies and shortages, but it also allowed for rapid industrialization.Putin’s Russia (2000s-present): After the collapse of the USSR, Russia transitioned to a mixed economy. While there is more room for private enterprise, key sectors like energy (oil and natural gas) remain under state influence. Russia’s economic output is heavily reliant on energy exports, making it vulnerable to global energy prices and fluctuations. The government, under President Vladimir Putin, maintains significant control over key industries and exerts influence on the overall economy.Throughout its history, the degree of centralization in Russia’s economic system has varied widely, ranging from decentralized feudalism to highly centralized planned economies. Economic outputs have also evolved, from agriculture to heavy industry to energy resources, reflecting the changing priorities and circumstances of each historical phase.Russia – An Emerging Economy with a Highly Industrialized PastWhile the Soviet Union produced immense amounts of industrial output, the empire before it and the Federation afterwards did not come close to that amount of output.Average yearly steel production:According to the World Bank, Russia’s industrial output (excluding construction) grew at an average annual rate of 7.5% from 1992 to 2008. However, it declined by an average annual rate of 2.6% from 2008 to 2018.The decline in industrial output was due to a number of factors, including the global financial crisis of 2008, the sanctions imposed on Russia by the West in 2014, and the COVID-19 pandemic in 2020.Despite the decline in industrial output, Russia remains a major industrial power. In 2020, Russia was the world’s 11th largest industrial producer, with a total industrial output of $1.6 trillion.Gas and oil are included in this industrial output, somewhat giving a more industrial aspect than reality. Russia was a top 10 economy from the 1500s onwards due to its population and abundance of raw materials and agricultural output. While being a top 5 industrial country with cutting edge technology providing many emerging economies with industrial products during the Soviet period, Russia has declined drastically in industrial and R&D capability since the dissolution of the Soviet empire. Since the 2000s there has been an attempt to recentralize and nationalize many heavy industries such as aerospace. Russia built some of the most amazing ships, vehicles, and planes and helicopters the world had ever seen. On the other hand Russia was far behind Western countries in terms of computer hardware research and production or other more advanced industrial output.Today’s Russian exports are made up almost exclusively of raw materials; mostly Oil and Gas, and then Coal, Gold, Platinum, Wheat, and Wood.Russia imports what you would expect an emerging economy to import. Cars, medicine, broadcasting equipment, and other higher tech goods.Russia’s Trade Partners: BRICS, the West or the CIS?Russian exports are mostly to Europe, China, and the US before the current invasion of Ukraine and the following sanctions. Most exports go to China (BRICS), the Netherlands, US, UK, Italy, from the West, Belarus (nearly an autonomous republic of Russia in essence, a CIS member), Turkey, and Germany, Kazakhstan, a CIS member.Most of Russia’s income comes from China and the West. Its own economic organization has lost a lot of importance since Ukraine left it in 2014 to move closer to the EU.The main countries Russia depended on for imports before the 2022 sanctions were China for 25% of its imports and then Europe with Germany in the lead. Now Russia has turned to China for most exports and imports with a growing trade connection to India for selling oil and gas. Russia is now dependent on China as its main trade partner for buying its raw materials and providing the country with almost anything more advanced than basic raw materials. From electronics to medicine to spare parts for daily appliances and vehicles.What does all of this have to do with Crypto?Russia has seen centralization of its economy grow to extremes in the past, with more or less extreme versions since the Golden Horde was overthrown. The end of the Soviet Union saw some reversal during the Yeltsin years. But centralization of information, political power, and economic power around Putin’s personal circle has become more and more visible since 2000, with a drastic rise about every 5 years. It is now inevitable that all decisions are made by that inner circle. If someone doesn’t follow the circle they are removed and replaced no matter how important they seem to be.Expect anything that can’t be used in an exclusive way to reinforce the income and power of the top inner circle to be banned or regulated in a way to make it fit for that use.The CBR’s stance was met with opposition from some members of the government, who argued that cryptocurrencies could be a useful tool for innovation and investment. In 2018, the Ministry of Finance proposed a more lenient regulatory framework for cryptocurrencies, which would have allowed them to be used for investment purposes.However, the CBR continued to oppose the use of cryptocurrencies, and in 2020, it banned cryptocurrency mining in Russia. The ban was motivated by concerns about the environmental impact of cryptocurrency mining and the potential for cryptocurrencies to be used for illegal activities.In 2021, the Russian government introduced a new law on cryptocurrencies that legalized cryptocurrency transactions but prohibited their use as payments for goods and services. The law also required cryptocurrency exchanges and miners to register with the government and to comply with certain regulations.The new law was seen as a compromise between the CBR and the Ministry of Finance, and it was welcomed by some members of the cryptocurrency community. However, others argued that the law was too restrictive and that it would stifle the development of the cryptocurrency industry in Russia.Since Russia’s invasion of Ukraine started a long list of sanctionsThe future of cryptocurrency regulation in Russia is uncertain. The CBR has continued to express its opposition to cryptocurrencies, and it is possible that the government could introduce even stricter regulations in the future. However, the Ministry of Finance has also said that it is open to the idea of further developing the cryptocurrency industry in Russia.Russian developers that can build amazing blockchain related technological projects are very numerous. Almost every blockchain project on earth boasts at least one Russian developer somewhere in its development history. But this aspect of the Russian economy is at the mercy of political centralization. Developers have left the country to emigrate to countries where they can continue to innovate. A trend that’s been ongoing in Russia’s history of fleeing minds for at least 200 years.Digital RubleThe history of CBDC regulation in Russia is still in its early stages. The Central Bank of Russia (CBR) first announced its plans to develop a CBDC in 2020. The CBR has been conducting research and development on CBDC since then, and it has published a number of white papers on the topic.In 2022, the CBR introduced a regulatory bill for CBDCs. The bill was approved by the Russian parliament in July 2023. The law allows the CBR to issue a CBDC, and it also regulates the use of CBDCs by businesses and individuals.The CBR has said that it plans to launch the digital ruble in 2025. However, the exact timeline for the launch is still uncertain.The CBR’s approach to CBDC regulation has been cautious. The bank has been reluctant to adopt a laissez-faire approach, and it has expressed concerns about the potential risks of CBDCs, such as the possibility of money laundering and terrorist financing.The CBR’s regulatory approach has been met with mixed reactions. Some people have welcomed the bank’s cautious approach, while others have argued that it is too restrictive. It is still too early to say what the ultimate impact of the CBR’s regulatory approach will be.Here are some of the key features of the Russian CBDC regulation:The digital ruble will be issued by the CBR.The digital ruble will be a legal tender in Russia.The digital ruble will be accessible to businesses and individuals.The use of the digital ruble will be regulated by the CBR.The CBR will have the power to freeze or seize digital ruble accounts.The Russian CBDC regulation is still in its early stages, and it is possible that the law could be amended in the future. However, the law provides a framework for the development and use of the digital ruble in Russia.For trade graphs:https://oec.world/en/profile/country/rus
