The cryptocurrency industry in Russia. What is in store for us in 2021?

At the end of a strange and very eventful 2020, bitcoin broke new price records every day. Many factors contributed to the bullish rally, from the halving in May, to the monetary stimulus of the global economy, which was a forced measure taken by the government during the fall of markets due to the spread of the Covid-19 pandemic. Whether to expect the trend to continue in 2021 is answered by Sergey Shanaev, director of CIS at Copper.

Massive adoption of cryptocurrencies by institutional players

Huge amounts of institutional capital flowed into the crypto markets in 2020. The interest of financial institutions in the industry grew in parallel with the emergence of innovative technologies. Recently, a number of exchanges and other cryptocurrency companies have been actively improving their security standards to attract new capital from family offices, investment funds and pension funds.

We have seen the emergence of new cryptographic protocols and innovative tools for large market players. New technologies have significantly improved the infrastructure in the industry and already allow institutional investors to securely store, trade and offer digital assets to clients.

For example, a number of leading exchanges, Deribit, Bitfinex and CoinFLEX, have integrated innovative solutions such as ClearLoop, which allow traders to trade instantly without transferring funds to the exchange. Transactions are made by locking digital assets into cold depository accounts until trading ends, providing additional security for cryptocurrency holders.

Impressive advances in 2020 have also been made in the field of cryptography. Multilateral Signature (MPC) has proven to be the best protocol for transferring funds, ensuring confidentiality and eliminating the disclosure of users’ personal data. Retail and institutional investors can be assured of anonymity, and thus the security of their own assets, when conducting transactions.

DeFi

In 2020, the DeFi market, with a huge number of projects, has provided high returns on investment in a low-interest rate environment. We expect this sector will continue to attract the attention of retail and institutional investors in the future.

Whether we like it or not, the world is moving toward a new financial system that will be even more decentralized than ever before. As the aggregate capitalization of the DeFi market grows and approaches $20 billion, regulators in various countries must ask themselves two important questions: How best to control the development of this industry? How to minimize potential risks while trying to benefit all sectors of the economy?

Regulation

In Russia, the government continues to take a tough stance on the regulation of cryptocurrencies. The adoption of new laws may lead to capital outflows from the country in the future, namely forcing disgruntled investors to move to jurisdictions with a more favorable environment. At the same time, there are various associations that are lobbying for less stringent rules in the CFA law and advocating for the integration of the cryptocurrency industry with traditional markets. We believe that adequate regulatory oversight is necessary and of paramount importance to the development of the digital asset industry. Going forward, this factor will encourage a large number of institutional players to enter the market and gradually increase their share of presence. But at the same time, overly strict regulation can create a high barrier for small projects. This will have a negative impact on the economy, as the industry will begin mass consolidation, small companies will not be able to comply with the requirements of regulators and will be forced to merge with larger players or leave the Russian market.

According to the new rules, the use of digital assets as money will be banned in Russia from January 2021, which contradicts public sentiment around the world. Digital assets are fundamentally intended to change the perception of financial transactions and are likely to play a key role in the global economy in the coming years. The recent acceptance of cryptocurrencies by traditional financial institutions such as Paypal also confirms this.

The popularity of digital assets in Russia is high and will continue to grow in the near future. According to the latest data from Chainalysis, Russia ranks second in the world in the adoption of cryptocurrencies in business. Moreover, despite the fact that crypto startups in Russia do not enjoy much support from the government and regulatory authorities as in other countries of the world, project founders in Moscow are often ahead of their Silicon Valley peers in creating new innovative products.

If the government recognizes that tech-savvy people, of which there are currently a huge number in Russia, have a strong interest in creating blockchain-based solutions to improve the quality of life for ordinary citizens, and adopts the appropriate regulatory framework to reduce the legal risks of entrepreneurs, the country’s reputation in the international arena will grow significantly. In this case, Russia will be able to declare itself as a global technological country; this factor will facilitate the inflow of investments from abroad and stop the emigration of talented specialists.

CEO and Founder of Crypto Consulting,
Web3 visioner – Kotov Dmitry

Related Articles