Dmitry Marinichev, an internet policy advisor to Russian President Vladimir Putin, plans to launch a cryptocurrency mining operation and is raising $100 million through an initial coin offering. Bloom
Dmitry Marinichev, an internet policy advisor to Russian President Vladimir Putin, plans to launch a cryptocurrency mining operation and is raising $100 million through an initial coin offering. Bloomberg reported the announcement.
The scale of his ambition becomes clear when you consider the landscape Marinichev hopes to enter. Bitmain, a Chinese company that dominates global bitcoin mining equipment manufacturing, has poured tens of millions into development, research, and manufacturing over the past several years.
Yet Marinichev claims that 10 percent of the capital raised through his ICO will give Russia control of 30 percent of global cryptocurrency mining. He builds this projection on two structural advantages: Russia has 20 gigawatts of surplus power capacity, and electricity costs less in Russia than in China. Because Russian electricity costs less, Russian miners could operate with lower expenses than competitors elsewhere.
In the near term, the mining operation would deploy equipment and ASIC chips from Bitfury, a Russian company, to compete against Bitmain and the Chinese mining industry. Bitfury's technology would serve as the foundation as the operation scales.
Marinichev made his announcement several months after Ethereum co-founder Vitalik Buterin visited Putin. Buterin's visit signaled government interest in blockchain technology. In June, the Kremlin released a statement describing the discussion: "Mr. Buterin described the opportunities for using the technologies he developed in Russia. The President supported the idea of establishing ties with possible Russian partners. We are doing a great deal to create a favorable business climate and above all to provide macroeconomic conditions for sustainable economic growth and a stable social system – so that working in Russia is beneficial and pleasant."
Russia's regulatory position on cryptocurrency has remained uncertain. The Ministry of Finance had proposed restricting digital currencies, but government and central bank officials have indicated a shift toward regulation rather than prohibition.
In April, Deputy Finance Minister Alexey Moiseev told Bloomberg that Russia would legalize and regulate digital currencies by 2018. "The state needs to know who at every moment of time stands on both sides of the financial chain," Moiseev said. "If there's a transaction, the people who facilitate it should understand from whom they bought and to whom they were selling, just like with bank operations." His words suggested the government viewed cryptocurrency legalization as viable provided that Know Your Customer and Anti-Money Laundering compliance systems would accompany the new regulatory framework.
If Marinichev's venture launches, it could establish a template for other Russian cryptocurrency companies and accelerate entry of new players into the market. Demand for bitcoin in Russia has grown since 2014, according to LocalBitcoins trading data. Once legalization arrives, Russia could emerge as a significant cryptocurrency market.
