Russia retreats from crypto ban as it pushes rules for industry

From the Editor’s Desk

Dear Read­er,

“War is a mat­ter not so much of arms as of mon­ey.” So said Thucy­dides, the Athen­ian gen­er­al and his­to­ri­an of the fifth cen­tu­ry B.C. Pelo­pon­nesian War.

Not much has changed since. Right now, mil­lions of peo­ple in Ukraine and along Russia’s west­ern flank face the threat of armed con­flict. But in Rus­sia, war and mon­ey — more specif­i­cal­ly, war and cryp­tocur­ren­cy — are becom­ing increas­ing­ly intertwined.

Moscow, fac­ing poten­tial­ly crip­pling eco­nom­ic and finan­cial sanc­tions over its deci­sion to invade parts of Ukraine, decid­ed a fort­night ago to reg­u­late cryp­tocur­ren­cies rather than ban them.

The tim­ing of that move, less than two weeks after Pres­i­dent Vladimir Putin expressed care­ful­ly cal­i­brat­ed sup­port for the country’s cryp­to min­ing indus­try, may be less a coin­ci­dence than a cal­cu­la­tion. When sanc­tions — includ­ing broad exclu­sion from the inter­na­tion­al finan­cial sys­tem — begin to bite, wouldn’t cryp­to present an oppor­tu­ni­ty to skirt them?

Maybe. But Mr. Putin’s more pow­er­ful cryp­to bet involves Russia’s min­ing sec­tor. The country’s exports are heav­i­ly weight­ed toward oil and gas, which sanc­tions will ensure have no West­ern buy­ers. What to do with all that excess ener­gy? Among oth­er things, why not mine cryp­to, as its pres­i­dent seems to be suggesting?

As neigh­bor­ing Kaza­khstan clamps down on its min­ing com­mu­ni­ty, prompt­ing some of its mem­bers to eye the exit, could Rus­sia steal a march to replace it as the world’s sec­ond-biggest min­ing hub, or even its biggest?

A min­ing push by Moscow would give the Rus­sians two things: an enlarged domes­tic indus­try, and brag­ging rights as they con­ceiv­ably edge clos­er to con­trol­ling the lion’s share of the hashrate of Bit­coin and oth­er cryptos.

Of course, brag­ging rights are very much the small­er prize when set against the income that could be gen­er­at­ed by a pumped-up min­ing indus­try, par­tic­u­lar­ly if the Krem­lin ensures it gets a slice of the action. Despite being able to onshore sig­nif­i­cant cryp­to hashrate, real mon­ey is what ulti­mate­ly mat­ters to stu­dents of strat­e­gy, and of history.

Until the next time,

Ang­ie Lau
Edi­tor-in-Chief
Forkast

Forkast.Insight | What does it mean?

OpenSea has become a sym­bol of grow­ing unease in the cryp­to community. 

Ear­ly adopters of NFTs have balked at the marketplace’s tra­jec­to­ry towards becom­ing a more cen­tral­ized NFT trad­ing hub, while investors and new users are call­ing on it to take a firmer approach to its man­age­ment of buy­ers and sellers. 

OpenSea should look to Web 2.0’s biggest DIY mar­ket­place, eBay, for inspi­ra­tion. In its ear­ly days, eBay faced a bar­rage of legal action over its hands-off approach to what was sold on its platform. 

The com­pa­ny had to rapid­ly deploy mea­sures to pre­vent copy­right infringe­ment, auc­tion snip­ing and theft to counter Amazon’s grow­ing dom­i­nance of e‑commerce. OpenSea should do the same. 

The recent spate of hacks and attacks are a sym­bol of OpenSea’s suc­cess, but also an inaus­pi­cious devel­op­ment. If it doesn’t get a grip on secu­ri­ty, it risks alien­at­ing both its com­mu­ni­ty and the investors that have pro­pelled it to a US$13 bil­lion val­u­a­tion.  

OpenSea, like eBay, col­lects rev­enue by tak­ing a cut of every trans­ac­tion — around 2.5% for every NFT sold. That gen­er­ates more than enough rev­enue for the com­pa­ny to beef up secu­ri­ty, even if it means los­ing some of its pio­neer cred­i­bil­i­ty in the more lib­er­tar­i­an cor­ners of the dig­i­tal asset space. 

Forkast.Insight | What does it mean?

The hype around meta­vers­es has prompt­ed numer­ous Chi­nese com­pa­nies to reg­is­ter as many meta­verse-relat­ed trade­marks as pos­si­ble, and the patent office is not hap­py about it.

Cut-throat com­pe­ti­tion in China’s inter­net indus­try is a well-estab­lished part of the momen­tum of tech­no­log­i­cal devel­op­ment in the world’s sec­ond-largest econ­o­my, but things have to slow down a bit for trade­mark reg­is­tra­tion. The Nation­al Intel­lec­tu­al Prop­er­ty Admin­is­tra­tion has made it clear that not every­thing in the meta­verse can be trademarked.

The agency’s approach is in line with Chi­nese reg­u­la­tors’ long-stand­ing atti­tude towards tech inno­va­tion. They need tech com­pa­nies to deliv­er results (which is why the inter­net giants’ noto­ri­ous “996” work­ing cul­ture has thus far been tol­er­at­ed, despite an only part­ly suc­cess­ful attempt to rein it in last year) while warn­ing against hype and the emer­gence of monop­o­lis­tic con­duct.

One thing is cer­tain: The meta­verse con­cept will con­tin­ue to trend and devel­op as the coun­try ramps up efforts to deploy 5G net­works, with more vir­tu­al real­i­ty and gam­ing con­tent from tech giants in the pipeline. That means Chi­nese com­pa­nies will need to walk a fine line between over­achiev­ing and stay­ing com­pli­ant with reg­u­la­to­ry imperatives.