Prospects of the cryptocurrency market in Russian Federation in terms of the positive dynamics of its public acceptance.
Due to the concentration of news stories and social media trends, most people are familiar with terms such as 'mining' or 'cryptocurrency'. The mere fact of that occurrence and the active proliferation of digital money is one of the most significant socio-economic phenomena of the last decade. These radical changes revolutionize social relations, state institutions and the management of global economic processes.
Regardless of the economic development of a nation, the social affiliation of its citizens and their overall level of education, cryptocurrency can be a controversial subject. Supporters of the widespread use of digital currency tend to say that it stimulates the expansion of economic autonomy of the individual, which is undoubtedly welcomed by most of the people, especially in the era of the coronavirus, when their rights were substantially restricted. It comes as no surprise that interest in cryptocurrency exploded after the pandemic began.
Yet opponents claim that the further spread of cryptocurrencies will lead to greater centralization of the management of economic and social processes, a worsening of the Cantillon Effect that currently dominates the world and consequently, a potential for an even greater inequality of wealth and economic opportunities. Interestingly enough, both points of view tell us about the inevitability of the further spread of cryptocurrency, as an advanced middle class and financial elite, the most active participants in economic processes, are interested in this new and radically disruptive 4th Industrial Revolution.
Despite the controversy about the implications of cryptocurrency, it clearly has become an integral part of economic reality and even with substantial resources, it is an inevitable reality. Recent research conducted by BitNovosti, the leading Russian-language information resource in the field of cryptocurrencies, showed that the level of adoption of cryptocurrencies in various countries has significantly increased, and therefore high rates of expansion of the volume and geography of its use can be predicted. It is noteworthy that among the leaders in this category there are countries with developed economies, where cryptocurrency is used primarily as an investment asset, and in the poorest countries in the world (Venezuela, Kenya, etc.), where the population turns to digital money, those citizens are utilizing it to safely store their wealth due to the overwhelming consequences of currency devaluation and to transfer money with speed and ease.
The Russian Federation is among the top 20 countries in which the cryptocurrency adoption index is growing most actively. According to RosBiznesConsulting - one of the most respected news agencies in Russia, about 17 million Russians own cryptocurrency, which is about 20% of the economically active population of the country. Given the traditionally high level of conservatism and distrust of any innovation, this number seems to be extremely high.
"Vedomosti" states that 46% of owners consider cryptocurrency to be their hobby, while for 5.6% of respondents it is their main occupation and for 45% it is viewed as an additional source of income. It is important to note that only a quarter (25.7%) of the study participants have ever used cryptocurrencies to pay for goods or services. 72.7% of respondents have no experience using cryptocurrencies as a means of payment, and 79.2% said that the ability to pay for goods and services with cryptocurrency is not crucial for them.
Based on the results of this study, we can conclude that the Russian digital currency market is closer to the markets of developed countries and is formed primarily based on the investment activity of the local population. Curiously, according to the same publication, cryptocurrencies are mainly owned by Russians with medium and low incomes: more than 50% of owners of digital assets consider their income level to be average, 29.6% (low) and only 1.7% (high). Simultaneously, 27.4% of participants spent their own savings on buying cryptocurrencies, 3% took out a loan, and about 30% borrowed money from friends or sold personal property to invest in digital assets.
However, studies published by the Institute of Public Opinion have led to the opposite conclusion: among the more affluent respondents, the proportion of those who admit to having a deeper knowledge base regarding cryptocurrencies is significantly higher: 37% versus 15%. This discrepancy might be caused by the fact that in the first case, respondents assessed their financial situation based on subjective feelings, while in the second, formal boundaries of wealth and poverty were used.
Generally, we can say that most of the potential owners of digital currency in Russia are not completely satisfied with their financial situation and have an average income that allows them to invest in digital assets. These people make up a significant part of modern Russian society, which may indicate the serious prospects for the ultimate growth of the investment attractiveness of digital currencies.
In addition, some data obtained by the Institute of Public Opinion also indicated a possible active growth of the cryptocurrency market in Russia: 51% of respondents will react positively to the establishment of a single global cryptocurrency, which will become a legal virtual currency that does not belong to any country or financial institution. 33% of respondents do not support this idea, and another 16% said they do not care. It is important to note that among the respondents who are positive about cryptocurrency, the proportion of young and middle-aged men (the most socially and economically active part of the country's population) is higher. This data allows supporters of the digitalization of money to look optimistically at the Russian market and predict its significant growth.
However, at the time of this publication, it is not entirely clear if the Russian government supports these developments. The desire of some representatives of the Russian authorities to ban the use of digital currency in the country may significantly limit the growth of private investors' interest in it. According to RBC, the Central Bank of the Russian Federation proposed to initiate the ban on the free circulation of digital money. Considering the influence that this organization has in the socio-economic policy of the country, the adoption of such a decision may soon become reality. However, the President of the Russian Federation then intervened and requested that the Russian government as well as the Central Bank to collaborate and achieve a consensus regarding crypto regulation. The President acknowledged that Russia has a clear competitive advantage in the mining industry and reiterated that the country has a surplus of electricity to fuel growth in this sector. The President made a definitive effort to state that the Bank of Russia, “…does not stand in the way of progress and is itself making efforts to introduce the latest technology in this sphere of activity.”. The mere fact that the issue of cryptocurrencies was so seriously considered by these governmental authorities indicates its ultimate significance.
If the state technically succeeds in limiting the circulation of cryptocurrencies, the growth of its market will depend on the punishment that will be imposed on violators of the next ban. It is obvious that not all users of digital currency will be ready to utilize it within its proposed legal conditions. To bring some clarity to this issue, we conducted an online survey among active users of cryptocurrency, (160 respondents in total), on whether they would use it under conditions of technical limitations and possible persecution. About 72% of responders answered this question in the affirmative, 9% said they would be most likely to abandon the use of digital currency, 19% were undecided. Most of the respondents who are ready to work with cryptocurrency in the event of an official ban believe that the state simply will not be able to physically limit its circulation.
In summary, our analysis of the existing trends in the Russian cryptocurrency market shows that there are currently no serious reasons for a negative forecast on its further growth — the use of digital currency in Russia is expanding exponentially.
Source: RADIANCETEAM Research and analysis 2022 by Dr. Yuriy Alexandrovich