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Coming In from the Cold: The Old Soviet Union’s Crypto Mining Adventure

Coming In from the Cold_ The Old Soviet Union's Crypto Mining Adventure

Since the breakup of the Union of Soviet Socialist Republics commonly known as the Soviet Union on 26th December 1991, the map of Central Europe has been turned on its head.

With an area of 22,402,200 square kilometres (8,649,500 sq mi), the Soviet Union was the world’s largest country, a status that is still retained by the Russian Federation, covering a sixth of Earth’s land surface.

In 1991, countries that had been under Moscow’s one-party state rule between 1922 and 1991 were freed from centralized control and finally left to re-establish their own national identities. For Moscow this was often at odds with their own, causing volatile relationships with Georgia and Ukraine with disputed Crimea a continual flashpoint.

Ukraine, Uzbekistan, Kazakhstan, Belarus, Azerbaijan, Georgia, Tajikistan, Moldova, Kyrgyzstan, Lithuania, Turkmenistan, Armenia, Latvia, and Estonia all broke loose as the USSR crumbled in 1991 with Soviet communism in tatters.

The lengthy restructuring of many of these countries’ economies resulted in some re-joining another league of nations, this time the 28-member European Union.  Estonia, Latvia, and Lithuania took this route whilst others from the old USSR still chose, some reluctantly, to maintain their ties to Russia as part of their own unique plans of economic reconstruction.

Since the creation of Bitcoin in 2009, many economies have begun to look to cryptocurrencies as part of a restructuring of outmoded financial systems, with both governments and central banks exploring the adoption of cryptocurrency and blockchain technologies for retail and large-value payments.

Russia

The Russian government has even considered the prospect of a crypto rouble as a foil to US sanctions. President Putin stated earlier this year that Russia cannot be “late in the race” for blockchain adoption, which he says includes crypto mining arguing, “Russia cannot allow this.” The country’s cold climate has been a pull, as companies draw on this as an important feature for cutting down energy costs associated with the cooling needs of mining infrastructure.

Crypto mining in Russia has become a huge industry on an individual level, but more importantly for the government at an industrial scale also. This is now driving operators towards locally run Russian mining pools. The Russian Association of Crypto Industry and Blockchain (RACIB) claims that there are now over 400,000 people employed in the sector. 70,000 enterprises operate hundreds of thousands of mining rigs, with an increase in one-man operators working from their homes.

The fall in the value of cryptocurrencies has consequently had a recent effect on hardware pricing though, with rigs that might have sold for USD 3,500 in January 2018 now achieving prices some 37.5% less a year later as demand falls. Although small-scale mining by amateur miners is clearly being hit hard, companies are developing more financially viable ways of operating.

Siberia

Still in Russia, and renown for the Gulag where Stalin imprisoned political dissenters in appalling conditions between 1930 and 1945, the region’s freezing conditions in winter has become the crypto miner’s best friend. Siberia is fast becoming Russia’s mining hub with most activity centered around Irkutsk, 2600 miles east of Moscow with an average temperature of just one degree above freezing. In Irkutsk the cost of labour is low and real estate is cheap, giving miners an extra incentive for making the move to Russia’s wild frontier. The most significant boon to miners is the cost of electricity. On average in Russia, one pays nine cents per kWh versus 12.7 in the U.S.A and 25 in the U.K.

Bitcoin Babushkas: Cryptocurrency mining in Siberia

Latvia

Latvia has the crypto bug, but not necessarily the support it would want from its government, with the Latvian central bank maintaining a keep-away stance as its advice to customers. The Cryptocurrencies’ exponential growth in the Baltic country has generated increased interest from the government as potential tax revenue.

Ukraine

In the Ukraine capital, Kiev, such is the hype surrounding Bitcoin that a statue of the pseudonymous creator of Bitcoin was ordered for construction in the same location where a statue of Russian communist revolutionary Lenin, used to stand. In March, the Minister of Economic Development said the government was planning to include cryptocurrency mining into the official state register of economic activities.

Last year police department employees were caught mining cryptocurrencies using the department’s resources for over four months before they were discovered and their mining farm seized. This kind of enthusiasm illustrates the way many Ukrainians view crypto mining; as a quick fix to hardship.

Crypto mining has become a significant factor of cryptocurrency activity in Ukraine with a recorded USD 80 million invested in this area. However, Ukraine still hasn’t endorsed legislation to legalize cryptocurrencies despite increased activity in the country’s crypto space; legislation talks which are reported to be looking at blockchain and the storage and trading of cryptocurrencies are long awaited by exchanges and miners.

Estonia

Estonia even toyed briefly with launching its own cryptocurrency, the Estcoin, through the country’s e-residency program, but later shelved the idea. One reason for Estonia’s raised profile in the region is due to the country’s proximity to Russia, where the future of cryptocurrencies continues to be uncertain, despite Vladimir Putin’s recent comments on adopting a state crypto-rouble, according to Entrepreneur Europe. This makes neighboring states an attractive proposition for Russian investment.

Lithuania

Lithuania has recently become a growing center for ICOs and crypto projects. Latest figures show that Lithuania is now attracting an impressive 10% of all global ICO investments, with cryptocurrency bringing in half a billion euros from such activities.

Georgia

The greatest cryptocurrency success story of all has to be ex-soviet state Georgia which has now reached the lofty accolade of becoming the number two crypto mining location in the world. Wedged between two giant economies on the top ten mining charts, China and the US, Georgia has utilized cheap hydroelectricity and friendly regulations to create its current standing.  However, US company, BitFury controls most of the mining activity supported by the Georgian government through preferential tariffs and a waiver on the payment of value-added tax.

The poor economic conditions of the country, with many Georgians living below the national average of USD 400 a month, it is unsurprising that cryptocurrency mining has been identified by the fast money associated with digital currencies. Georgia is among several jurisdictions in the post-Soviet space that have been attracting crypto miners with friendly regulations and low operating costs. In terms of mining profitability, the country ranks second only to China.

Such is the demand for mining Bitcoin in the old Soviet region that the consumption of electricity has become a worry for some government regulators. In Abkhazia, recognized as an independent state by Russia, but part of Georgia by UN decree, the situation has become strained due to cryptocurrency mining. As a result, the Republic of Abkhazia has now cut power to some of the cryptocurrency mining farms in the region in order to conserve energy and as part of a series of “temporary measures to limit the consumption of electricity by certain categories of subscribers.”

Given that Bitcoin continues to hold its own on cryptocurrency markets, the future of many ex-Soviet nations is best approached from out in the cold.

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Bitcoin is ‘Back in the USSR’

Russia’s launch of its first crypto investment bank is the hot news from Eastern Europe’s sleeping bear, but how is the old USSR and the rest of the eastern bloc holding up in the charge to regulate the nascent industry in the region?

In the Ukraine capital, Kiev, plans are underway to site a statue of the pseudonymous creator of Bitcoin, Satoshi Nakamoto, in the same location where a statue of Russian communist revolutionary Lenin, used to stand. This appears to augur well for the bitcoin community… or does it?

Things are changing since ex-President Victor Yanukovich created his own cryptocurrency oligarchy; the pro- Russian leader is now exiled in Russia and wanted in his home county for high treason. Today, according to businessman Michael Chobanian, who opened the first Ukraine exchange offering national currency hryvnia for Bitcoin: “Ukraine is a haven for cryptocurrency – no one can or will stop you.”

His comments don’t exactly ring true in light of recent swoops by state security forces on Kvazar semiconductor plant in Kiev, where a large mining operation was located. This, a month after armed men from Ukraine’s Security Service broke into the Odessa offices of ForkLog, a major Russian-language crypto news site, and seized its computers and hard drives.

In an attempt to start a dialogue on cryptocurrency, Alexei Mushak, a member of the Ukrainian parliament, has sought to urge the people to comment on Bitcoin, taking to Facebook to do so recently, stating:

“We go to the home stretch to create conditions for digital tokens and cryptocurrency in Ukraine. This is the outcome of many meetings and work of many people. There are many more nuances left to figure out…”

Cryptocurrency regulation in Ukraine remains a work in progress, despite the National Bank of Ukraine (NBU) stating that it was “considering” introducing a digital version of the hryvnia earlier this year.

Ukraine’s northern neighbor Belarus has taken what appears to be a sensible approach to a difficult problem in some of the old USSR states. Both blockchain and cryptocurrency related business activities are legislated under the law in Belarus. Mining and exchanges are not regarded as business activities and consequently are not subject to taxation. In fact, the great news for crypto investors is they are not required to declare crypto income until 2023.

Traveling through the old USSR even further north, Estonia even toyed briefly with launching its own cryptocurrency, the Estcoin, through the country’s e-residency program, but later shelved the idea.

The e-residency program, introduced in 2014, allows non-Estonians access to national services such as company formation, banking, payment processing, and taxation. The program also allows anyone in the world to apply for a digital ID card and gain access to Estonian e-services when planning to start a company in the country.

Many crypto companies are now doing business in Estonia and the Baltic region is becoming a “Northern crypto-paradise” along with Lithuania and Latvia, both also experiencing an economic boom recently. Estonia’s widespread adoption of cryptocurrencies and fintech has, therefore, become a breeding ground for new startups.

Latvia has the crypto bug, but not necessarily the support it would want from its government, with the Latvian central bank maintaining a keep away stance as its advice to customers.

Latvia currently levies a 20% capital gains tax, and applying it to cryptocurrency would reportedly require a change in the country’s tax laws. Currently, cryptocurrencies are not recognized under existing legislation. However, its exponential growth in the Baltic country has generated an increased interest from the government as a potential tax revenue.

Lithuania has recently become a growing center for ICOs and crypto projects. Latest figures show that Lithuania is now attracting an impressive 10% of all global ICO investments, with cryptocurrency bringing in half a billion euros from such activities.

 

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Lithuanian Ministry of Finance Reveals Guidelines on ICO Tokens

The Lithuanian minister of finance considers the country to be in the “middle of explosion of ICOs and blockchain based projects”, as the ministry published a thoughtful guideline document that acknowledged “the brave new crypto economy world”.

In the document, the guidelines bring to light how cryptocurrencies should be regulated and taxed. It outlines that they are recognized as having the characteristics of securities, although for tax purposes, it doesn’t mean that they will necessarily be treated the same way.

The ministry of finance also splits cryptocurrency classifications into two parts regarding the recommended frameworks, which depends on whether a token “grants profits or governance rights”.

This applies to investors who acquire tokens through initial coin offerings (ICOs); though the existing legislature applies to “payment tool” tokens or access to particular products, the report recommends that several regulatory standards should be applied if a token grants profits or governance rights.

The ministry report breaks down ICO tokens into a variety of areas such as tokens that are issued, the ICO operator, if it participates in secondary market exchanges and whether the ICO is a crowdfunding activity.

Regarding taxation and asset class, the report reads:

“In terms of Corporate Income Tax and Personal Income Tax, according to the substance and economic sense of transactions, the virtual currency is recognized as current assets that can be used as a settlement instrument for goods and services or stored for sale.

For the purposes of VAT, the virtual currency is considered as the same currency as euros, dollars etc. For the purposes of other taxes, other type of instrument, e.g. certain types of tokens, may be recognized as a virtual currency as well.”

Earlier Discussions

In October 2017, the Lithuanian Central Bank issued an “approved position” on virtual currencies. Marius Jurgilas, Member of the Board of the Bank of Lithuania, described them as “an instrument involving high risk”. He went on to say that financial institutions that were operating legally and arewerealso under the supervision of the Bank of Lithuania “must strictly disassociate themselves” from them.

The October 2017 document raises awareness for financial services who engage in cryptocurrencies, the document had the intention to inform that these activities leave them open to the possibility of financial crimes, terrorism financing etc.

The report suggests that should financial market participants wish to do so, they would need to adhere to strict compliance requirements to prevent such matters.

However, in April 2018, the Central Bank of Lithuania began crucial discussions exploring the uses of cryptocurrency, engaging with commercial banks, government regulators and traders with the goals of creating a faster and affordable means to license the operation of ICOs.

The Baltic state of Lithuania is host to approximately 3 million inhabitants and, much like other small economies such as Malta and Gibraltar, it has successfully been an early adopter of cryptocurrency and blockchain projects. Should it manage to implement these guidelines, Lithuania will be a positive frontier for cryptocurrency and blockchain-related projects.

 

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20/20 Central Bank Execs Forum Agrees Bitcoin No Threat Yet to Fiat

At Amsterdam’s Money 20/20 Conference on 5 June, bank representatives from four countries were asked to respond to the question “Can cryptocurrencies spell the end of fiat currencies?”, reports Cointelegraph.

During a panel discussion, representatives from Swiss National Bank, the Bank of Lithuania, the Bank of England, and the Bank of Canada took turns in expressing their views on the topic.

The responses were generally in agreement, with Bank of Canada’s James Chapman suggesting that this situation would only occur in a hyperinflation scenario, with Swiss National Bank’s  Thomas Moser concurring that a poor fiat performance may well invite more cryptocurrency activity, but argued that “as long as central banks do a good job, there is no real for central banks to disappear”.

Switzerland is now well known as a crypto hub, as reported in Bitcoin News recently, and has achieved widespread adoption across the alpine nation. Moser clarified this suggesting that so far it had been “well tolerated” due in part to the crypto haven tag and a balanced approach to initial coin offerings (ICOs) and had become an attractive fintech magnet for many companies.

Martin Etheridge, head of division at the Bank of England, somewhat hedged his bets expressing, “who knows what the future will hold”, although he did say that he saw little prospect of fiat being overtaken or replace by cryptocurrency:

“[But] I think the odds are stacked very much in favor of fiat currencies. I think it would take a pretty fundamental shift of public perception or the existing market system for it to happen.”

Dr Marius Jurgilis of the Bank of Lithuania clarified that a central bank-issued cryptocurrency and a cryptocurrency are not the same things, adding that the main product of a central bank is “a matter of trust”:

“…but if the society starts questioning, or it if it thinks that the things we are selling could be got in a cheaper, more convenient way, other things will appear.”

He added it was this level of trust that his country’s banks were guarding while admitting that the bank’s position was not totally entrenched. In mid-April, Lithuania’s central bank reportedly began looking into cryptocurrencies, round tabling points of view from all sectors, including regulators and investors.

 

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Startup Wins Prize to Partner Volkswagen on Car History App Project

German automobile giant Volkswagen has offered a Lithuania-based company a role in its Dresden center after a successful pitch in a manufacturers competition, writes Cointelegraph.

The company, carVertical, has developed a platform for used car history reports enabling users to verify details of a car’s past before making a purchase. The competition held in Riga, Latvia saw carVertical’s pitch as the most inventive.

The decision was announced after numerous teams of entrepreneurs presented their pitches at an event organized by German-Baltic Chamber of Commerce. As winners, carVertical will begin work in Die Gläserne Manufaktur, Volkswagen’s innovation hub in Dresden in September of this year, with EUR 15,000 in financial support.

The outcome of the project is the joint development of blockchain-based solutions, intended to place Volkswagen as the leader for future mobility applications, also providing carVertical with valuable resources and expertise.

“In connection with the program, Die Gläserne Manufaktur also offers the assistance of mentors and coaches, an attractive working environment at the facility, high-quality IT infrastructure, contacts with Volkswagen research and development employees and decision-makers, professional advice by Sächsische Aufbaubank (SAB), close proximity to the start-up scene and both financial and personnel support from the City of Dresden,” says the press release.

CarVertical’s history records app is designed to prevent used car frauds by using the app to locate a car’s Vehicle Identification Number (VIN) located in its technical passport or on a car’s body.

The car’s VIN is the identifying code for a specific automobile. It serves as the car’s fingerprint, as no two vehicles in operation have the same number. A VIN is composed of alphanumeric 17 characters that act as a unique identifier for the vehicle. It displays the car’s unique features, specifications, and manufacturer. The number can also be used to track recalls, registrations, warranty claims, thefts, and insurance coverage.

CarVertical claims to be most successful automotive-based initial coin offering. The team raised almost USD 20 million during its coin offering in January 2018.

“Our goal is to enable every car buyer around the globe to get authentic and non-faked information about the specific vehicle and to help consumers in the maintenance of their vehicles,” states the carVertical website.

 

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Estonia’s $2.3M Platform Supports ‘Northern Crypto Paradise’ Tag

With the news that an Estonian invite-only entrepreneurs’ community has raised USD 2.3 million to develop a “founders to founders” skill-sharing platform, Estonia continues to make its mark on the crypto space in the region.

Estonian World reported that the new platform, Lift99, aims to “build an online community of influencers and startup talents to lead this revolution. As the E-residency program has shown, it’s in the local DNA to think outside of the box, especially in the startup world”.

The e-residency program, introduced in 2014, allows non-Estonians access to Estonian services such as company formation, banking, payment processing, and taxation. The program also allows anyone in the world to apply for a digital ID card and gain access to Estonian e-services when planning to start a company in the country.

“We’re working to make e-residency the best option globally for entrepreneurs launching a trusted ICO, while proceeding with three variants of our own ‘Estcoin’ under consideration,” Kaspar Korjus, managing director of e-residency at Enterprise Estonia, wrote in a Medium blog post.

Many crypto companies are now doing business in Estonia. According to Cryptovest, the Baltic region is becoming a “Northern crypto-paradise” with Lithuania, Latvia, and Estonia experiencing an economic boom recently. Estonia’s widespread adoption of cryptocurrencies and fintech has become a breeding ground for new startups.

Estonia is a country with a significant internet penetration and now boasts its own Bitcoin ATMs established back in 2015 when the capital Tallinn saw the installation of its first machine. The government has also recently considered its own token, the ‘Estcoin’.

Another reason for Estonia’s raised profile in the region is due to the country’s proximity to Russia, where the future of cryptocurrencies continues to be uncertain, despite Vladimir Putin’s recent comments regarding adopting a state crypto-rouble, according to Entrepreneur Europe. Crypto adoption in Russia still remains at a punitive stage, until the country makes its next change of direction. This makes neighboring states an attractive proposition for Russian investment.

The region also has a relatively high concentration of Bitcoin full nodes, which strongly correlates with cryptocurrency knowledge and adoption. Along with a favorable tax policy, supportive regulators and safe ICOs, it appears that Estonia remains on solid ground in the crypto space.

 

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PR: CoinGate Announces Partnership with PrestaShop to Bring Cryptocurrency Payments to 80,000 Ecommerce Merchants

Press Release: Lithuania-based blockchain payment gateway CoinGate has joined forces with open-source, ecommerce platform PrestaShop. The collaboration with reach over 80,000 EU-based merchants.

21 March 2018, Vilnius, Lithuania –  CoinGate, a leading payment gateway for blockchain payments in the European market, and PrestaShop, one of the largest open-source e-commerce platforms globally, announced a cooperation to enable tens of thousands of online merchants to start accepting cryptocurrencies as a payment method. The integration of CoinGate services into the back-end of PrestaShop platform will reach at least 80,000 EU-based merchants, giving access to this innovative payment method in a few clicks.

This is a significant step in the adoption of cryptocurrencies, and CoinGate CEO Dmitrijus Borisenka explains the reasoning behind the partnership, stressing the importance of enabling the masses to access this new exciting technology.

“Encouraging adoption among people beyond the tech-savvy early-adopters is one of the biggest priorities for us. PrestaShop has an ideal base of small to medium stores that may well utilise cryptocurrencies not only as an innovative and increasingly popular payment method, which is much cheaper than traditional card payments, but also the promotional benefits that the Bitcoin tag carries. There is an entire new market of people who own all kinds of cryptocurrencies and are looking for ways to spend them, but the gap between customers and merchants in this sphere is still huge. It is therefore crucial to educate and encourage businesses to adopt a forward-thinking attitude and to overcome the prevailing misconceptions that surround cryptocurrencies.”

To make things as simple as possible for newcomers, CoinGate ensures the mechanics of integrating the payment gateway are user-friendly, and basic familiarity with cryptocurrencies is more than enough to get started. The payment module can be installed with a few clicks, and from there the merchant only needs to set up an account with CoinGate to start accepting payments. The payment processor supports Bitcoin and over 50 other cryptocurrencies, including Ethereum and Litecoin, among others, in a single payment environment, catering for the widest range of cryptocurrency owners. For merchants, however, things could not be simpler: the accumulated payments are settled in a single currency chosen by the merchant.

CoinGate also allows real-time settlements in Euros for its customers, delivering received payments to merchant bank accounts the next day – an important feature for merchants new to the crypto space or worried about the volatility of cryptocurrencies.

“It is absolutely safe to accept cryptocurrencies as a way of payment. We protect our merchants from exchange rate volatility risk by locking the price of Bitcoin at the moment of the purchase. Merchants who opt to receive Euro payouts from us, essentially, do not have to touch cryptocurrencies at all – we handle every stage of the process.”

CoinGate already works with over 1,500 businesses worldwide, and the partnership with PrestaShop will open doors for more than 80,000 online stores of all kinds to have an easy entry into the cryptocurrency market. The cooperation of the two companies is a promising development in the rise of blockchain-based payments, a market that is rapidly progressing towards maturity, but so far has been restricted by lack of user-friendly interfaces to connect merchants and customers.

About CoinGate

CoinGate, based in Vilnius, Lithuania, is a cryptocurrency payments company established in 2014. The company offers a range of blockchain-focused services for businesses and individuals, including automated payment processing and brokerage services. CoinGate has a user base 50,000 and boasts monthly volumes exceeding over €10 million with over 1,500 merchants using the company’s payment gateway.

About PrestaShop

Founded in 2007, PrestaShop delivers an open source e-commerce software that offers an efficient, powerful, flexible and innovative platform. Today more than 270,000 e-stores in 195 countries operate under PrestaShop. PrestaShop’s mission is to work side by side with the e-merchants to grow their business and give them all the tools to be the most successful possible. Present in Europe and the U.S., the company has been funded by XAnge Private Equity, Seventure Partners et Serena Capital.

Learn more about CoinGate here – https://coingate.com/
Read the official CoinGate blog – https://blog.coingate.com/
Follow CoinGate on social media:
Facebook – https://www.facebook.com/coingatecom
Twitter – https://twitter.com/CoinGatecom
LinkedIn – https://www.linkedin.com/company/coingate
Learn more about PrestaShop here – https://www.prestashop.com/en

Media Contacts

Name: Vilius Semenas
Email: [email protected]
Location: Vilnius, Lithuania

CoinGate (coingate.com) is the source of this content. Virtual currency is not legal tender, is not backed by the government, and accounts and value balances are not subject to consumer protections. This press release is for informational purposes only. The information does not constitute investment advice or an offer to invest.

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