Startups Speak Out on Russia's Looming Bitcoin Ban

As Russia prepares for a forthcoming decision on bitcoin's legal status, current and former entrepreneurs weigh in on their market strategy.

AccessTimeIconMar 24, 2015 at 7:15 p.m. UTC
Updated Mar 6, 2023 at 3:12 p.m. UTC

“We don't plan to close.”

Such is the resolve of BTC-e, the largest exchange for the Russian ruble, heading into spring 2015. The informal date has been on the minds of many in the bitcoin community since it was first billed as when Russia would ban bitcoin in August of last year.

The most recent comments suggesting this probable future were issued by deputy finance minister Alexei Moiseev on 20th March. In new statements, the official in charge of coordinating Russia’s financial policy doubled down on his past terse dialogue toward cryptocurrencies, stating that the action will take place as previously announced.

While the rhetoric may suggest a battle between two staunchly opposed sides, interviews with domestic entrepreneurs indicate that Russia’s apparent anti-bitcoin stance has already done much to drive away any interest in the market.

Interviews with native or expatriate entrepreneurs suggest the evolution of Russia’s bitcoin market continues to attract more attention from media abroad than from those who would be positioned to serve its consumers.

The story of ALFAcoins CEO Vladimir Chelpanov, is indicative of the general narrative – the startup, which at first attempted to build a Russian alternative to BitPay, now doesn’t monitor the regulatory situation in Russia at all.

“At the moment, our business model excludes the Russian market,” Chelpanov told CoinDesk.

Chelpanov, however, is by no means alone. Regardless of the final decision, statements suggest Russia may already have done enough to halt its market growth.

Market spike

The statements of current and former Russian entrepreneurs stand in contrast to English-language headlines that suggest bitcoin has become an attractive option for Russian investors given the recent struggles of the ruble.

Anton Vereshchagin, founder of 247exchange, began positioning his bitcoin brokerage business toward the international market last year, and has since added a number of support services. The startup now boasts roughly 7,000 users.

Still, Vereshchagin took little interest in Russia's perceived market activity, suggesting it was more of a byproduct of how difficult it was to secure US dollars given that many foreign exchange brokers had ceased operations.

“People are scared that ruble will continue falling (especially the ones who had RUR balances at BTC-e), and are trying to buy bitcoins hoping that value of their savings will not decrease so much,” he said at the time.

Other market observers like Tuur Demester saw the situation differently, suggesting wealthy Russians may begin opening accounts with bitcoin exchanges to move out of the ruble.

Regardless of what might have been the behavior of Russian consumers at that time, data from Bitcoinity shows BTC/RUR trade volumes have once again settled on BTC-e, and it seems the spike in market activity did little to drive business interest.

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Indacoin’s big decision

Bitcoin exchange Indacoin remains one of the few industry startups both openly serving the Russian market and basing its operations domestically, a decision that is currently weighing on the company's top executive.

CEO Stanislav Kosorukov told CoinDesk that he is watching regulatory developments in Russia closely as he considers relocating his eight-person team. He cited the cost of doing so as a factor to consider.

“We’re thinking about that and now we’re waiting,” Kosorukov said, adding that he expects to make a final decision in the spring, when the company’s financial picture is clearer.

The threat of action has still hindered the company, however, as Indacoin was previously dropped by Qiwi wallet, a Russian payments service partner that has since cut ties with the country's emerging bitcoin industry.

Currently, Kosorukov said the company’s main goal is to focus on its ability to offer credit and debit card services and margin trading as the exchanges differentiators. Indacoin estimates that 15% of its volume is from Russia, but he says there are few reasons to expect any growth.

“The community here is not so big and it would take us too much effort,” Kosorukov said.

International focus

Most startups with ties to the market now stress that their goal is to serve international customers broadly.

Boaz Bechar, CEO of block explorer BlockTrail, for example, is keen to stress that, despite the fact that one of its founders started Russia’s largest social network, the company doesn't need similar success in this market.

“While our co-founder and investor is of Russian background, Russia has never been a target market for us, both because of the regulatory environment, but primarily because we are aiming to create a global platform and not a localized service,” Bechar said.

He added that should the regulatory environment change, however, BlockTrail would consider engaging with consumers in the region, a statement echoed by many local market participants.

“BlockTrail will remain unaffected and indifferent on any decisions Russia wishes to make regarding bitcoin,” Bechar continued.

The boldest respondent may be BTC-e, which has suggested it will continue its activity in the RUR markets regardless of any actions by regulators or third-party partners that help it facilitate such trading.

BTC-e's statements suggest that Russia’s budding bitcoin community may continue to be served, even if monetary penalties are passed against its use.

“We don’t live in Russia," the exchange representative said.

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