In February 2018, something both absurd and amusing happened at a Russian nuclear research center: several employees were suspected of using the institution's computing equipment to mine cryptocurrency for themselves.
The incident took place in Sarov. This closed city has deep historical ties to Soviet nuclear weapons development, and the institution involved was not an ordinary internet company but the Institute of Experimental Physics under the Russian Federal Nuclear Center. A spokesperson for the institution confirmed to RBC that someone had attempted, without authorization, to use work computing resources for private purposes including mining; the individuals concerned were detained and a criminal case was opened.
Looking only at this news item, it is easy to treat it as just another anecdote about the "fearless Russians." But looking further ahead reveals a more interesting shift: in 2024, Russia established a dedicated legal framework for mining; and by 2026, even cryptocurrency exchange and custody institutions began entering the central bank's register.
From nuclear research center employees secretly using computing equipment to the state arranging identity, taxation and trading channels for this industry, what happened in between?
Many people offer a simple answer: Russia was sanctioned, so it began to embrace cryptocurrency.
This explanation captures an important cause, but it misses the most noteworthy part of this history.
Russian miners, merchants, the finance ministry and the central bank have never had the same expectations of cryptocurrency. The war intensified their disagreements: foreign trade needed new methods of receiving and making payments, yet the central bank was unwilling to give up management of fund flows just so that a payment for goods could arrive.
Why Russia initially wanted to ban cryptocurrency
As early as January 2014, the Russian central bank publicly warned about Bitcoin. That announcement emphasized that virtual currency lacks backing, that its price is speculative, that exchange services may be involved in money laundering and terrorist financing, and it referred to the prohibition of "money substitutes" under Russian law.
For a central bank, this set of concerns is not hard to understand.
If residents exchange rubles for Bitcoin, funds may leave domestic banks and financial markets; if merchants begin accepting cryptocurrency directly, the ruble's status as a payment instrument may also be affected. Virtual currency prices are also extremely volatile, and if the price falls, losses suffered by ordinary people may in turn become a social problem the government has to address.
But for those operating cryptocurrency mining farms, as long as the mined coins can still be sold and the income covers costs, there is reason to keep the machines running. The central bank's warning did not answer how this business should be operated, and the equipment already invested in would not disappear because of it. The Sarov incident a few years later showed the outside world how far this profit-driven impulse could go.
Russia's senior leadership is not entirely without interest in blockchain technology.
During the 2017 St. Petersburg International Economic Forum, Putin met with Ethereum co-founder Vitalik Buterin. According to the Kremlin's account of the meeting at the time, the discussions concerned the application of blockchain technology in Russia and establishing contacts with local partners. This supportive attitude toward technological application and the central bank's wariness of private cryptocurrencies can coexist.
In 2020, Russia adopted a law on digital financial assets, whose main provisions took effect in 2021. The law established rules for the issuance and circulation of digital financial assets, which may represent monetary claims, rights relating to securities and the like. Bitcoin does not fall within this category, and at the time Russia still restricted the use of crypto assets to pay for goods and services within its territory.
By January 20, 2022, the central bank, in its consultation report titled "Cryptocurrencies: Trends, Risks and Measures," proposed prohibiting organizations in Russia from issuing, trading and exchanging cryptocurrencies, and advocated banning mining.
What the Central Bank of Russia was concerned about was not merely retail investors speculating in coins. Mining consumes electricity, trading channels funds out of the traditional financial system, and private money may also affect monetary policy. Following this logic, keeping the industry outside the financial system appears to be the least troublesome approach.
Russia's finance ministry did not accept this answer.
Ivan Chebeskov, then head of the finance ministry's financial policy department, publicly advocated regulation rather than prohibition. Trading in cryptocurrencies was already an indisputable fact, and driving the business entirely abroad or underground would in fact make it harder for the state to regulate.
Six days later, Putin addressed this debate at a meeting with government members and called on the government and the central bank to reach a consensus. He also noted that Russia had certain competitive advantages in mining, including electricity conditions and a trained workforce.
At the time, the finance ministry wanted to keep the already existing business within the country, while the central bank insisted on guarding against capital outflows and the risks of private money. The two sides were still arguing, but the financial sanctions brought by the war changed the premises of the cryptocurrency discussion.
Sanctions changed Russia's options
On February 24, 2022, Russia launched a full-scale military operation against Ukraine.
In March of the same year, the Society for Worldwide Interbank Financial Telecommunication (SWIFT), in accordance with EU regulations, disconnected the first seven designated Russian entities and their relevant subsidiaries. The disconnected banks lost access to this global interbank messaging network, and companies' existing cross-border bank settlement arrangements were affected accordingly.
Russia subsequently increasingly used the renminbi and other currencies for settlement. In its Financial Stability Assessment for the second and third quarters of 2023, the Bank of Russia disclosed that the renminbi's share of Russian export settlement rose from 13% in January of that year to 35% in September. In less than a year, the renminbi had become an important currency for receiving Russian export payments.
But the foreign banks handling payments also began tightening their operations. In December 2023, the United States expanded its authority to impose sanctions on foreign financial institutions involved in transactions related to Russia's military-industrial base. Banks had to review customers, counterparties and the end use of goods, and some institutions simply reduced or even stopped settlement business with Russia.
In April 2024, after interviewing five people familiar with the matter, Reuters reported that some Chinese banks were avoiding Russia-related business for fear of secondary sanctions, and that companies turned to the Shanghai branch of the Russian bank VTB to handle settlement, with queues for account opening appearing immediately. Some interviewees said Chinese suppliers had to wait two to three months to open an account, and some companies still had not succeeded after six months. Even if both sides agreed to use the renminbi, finding a bank able to take on the business could still take months.
In July 2024, the State Duma passed a bill allowing import and export enterprises to settle foreign trade payments in crypto assets. The relevant law was signed in August, with business initially organized by the central bank as a pilot, and both the participating enterprises and the trial period were subject to restrictions.
By December 2024, Finance Minister Anton Siluanov said in a television interview that Russian companies had begun using digital currencies such as Bitcoin for international payments, including Bitcoin mined within Russia.
How large is Russia's crypto industry
The domestically mined Bitcoin mentioned by the finance minister is backed by mining that Russia has carried on for years.
As early as March 2021, Reuters reported that BitRiver operated a 100-megawatt data center in Siberia, hosting equipment for miners from the United States, Europe and Japan. Clients valued the cheap local hydropower, while BitRiver provided electricity and server space and charged hosting fees in US dollars or rubles.
Just how cheap is the local electricity? In the price list published by the Irkutsk power supply enterprise for the second half of 2024, the first-tier electricity price for ordinary urban residents was 1.58 rubles per kilowatt-hour, and the corresponding price for rural residents was 1.106 rubles. Converted at the exchange rate in early July 2024, these were approximately RMB 0.13 and RMB 0.09 per kilowatt-hour.
For comparison, consider residential electricity prices in Shanghai in the same year: the first-tier non-time-of-use price for residents with one meter per household was RMB 0.617 per kilowatt-hour, approximately 4.6 times and 6.6 times the two prices above.
Mining farms attracted by low costs gradually formed a considerable scale of electricity consumption. In July 2024, citing estimates by the Ministry of Energy at an economic work meeting, Putin said that mining in Russia consumed about 16 billion kilowatt-hours of electricity each year, close to 1.5% of national electricity consumption.
In 2024, Russia established formal operating rules for mining. In November, the Federal Tax Service launched a mining registration service, under which companies and individual entrepreneurs could engage in business only after registration. Starting in 2025, miners must also file electronically with the tax authority, by the 20th day of the month following receipt of digital currency, their output and wallet address identifiers, and those participating in mining pools must also report the relevant addresses. Where a mining farm is located, who operates it, and which address the mined coins enter began to have records that could be checked against one another. The relevant income was also brought into tax administration.
The number of mining farms continued to increase, and local power supply began to come under strain. In April 2025, parts of southern Irkutsk Oblast imposed a mining ban lasting until 2031.
Beyond registration, law enforcement authorities are also investigating practices such as electricity theft at mining farms. In October 2025, the Russian Ministry of Internal Affairs reported that a mining farm suspected of illegal electricity use had been investigated in Leningrad Oblast, with preliminary estimates of losses exceeding RUB 1 billion, six suspects detained, and the case involving suspected abuse of office.
The mined coins still need to find buyers, and residents' investment demand has persisted. Russia has long had a large crypto trading market, yet domestic financial institutions have long lacked the institutional arrangements to take on this type of business.
According to blockchain analytics firm Chainalysis's estimates of the geographic attribution of on-chain funds, from July 2024 to June 2025, the volume of crypto assets received attributable to Russia was approximately USD 376.3 billion, higher than the United Kingdom's USD 273.2 billion over the same period.
Overseas platforms hold customer accounts, transaction records and fee income. If Russia is to regulate this business domestically, it must allow domestic financial institutions to take on residents' trading demand.
In March 2025, the central bank proposed first allowing a small number of investors whose assets and income meet very high thresholds to buy and sell cryptocurrencies during a three-year pilot. By December of the same year, its new proposal had already brought ordinary non-qualified investors into consideration, although the types of coins and amounts they may purchase remain restricted.
In a report covering the fourth quarter of 2025 through the first quarter of 2026, the central bank noted that the number of visits by Russian users to centralized crypto platforms fell by 32% compared with the previous two quarters. Meanwhile, as of early April 2026, investments formed by residents through financial instruments linked to crypto asset prices within Russia amounted to approximately RUB 3.8 billion.
By September 2026, the Law on Digital Currency and Digital Rights took effect, giving residents an institutional channel to buy and sell cryptocurrencies through domestic regulated institutions. Ordinary non-qualified investors must undergo testing, and the scope and limits of purchases remain restricted; brokers, exchange and custody institutions, meanwhile, began to take on the corresponding business under the new law.
On October 6, the central bank announced that the first batch of five digital custody institutions and four crypto exchange institutions had entered the register. Exchange institutions may conduct over-the-counter trading with their own funds, while custody institutions are responsible for recording and transferring the relevant assets. These institutions must adjust their operations to the requirements of the new law by September 2027.
Under the new law, import and export enterprises have gained greater scope for cross-border crypto payments, while the prohibition on payments for domestic goods and services is retained. The central bank allows crypto assets to enter the regulated trading market while continuing to uphold the ruble's status in domestic payments.
After Russian exchanges were investigated
When Russia began to arrange formal status for trading institutions, a group of platforms that had been operating earlier had already brought this market into the sight of international enforcement.
One of them, Garantex, was once a major cryptocurrency exchange platform in Russia.
This trading platform was initially registered in Estonia, but its main business activities were in Moscow and St. Petersburg. In 2022, it lost its Estonian digital asset service license and was placed on the sanctions list by the U.S. Department of the Treasury, yet it continued to operate thereafter.
In March 2025, Garantex faced joint enforcement action. The United States seized the relevant domain names, German and Finnish law enforcement authorities seized servers, and the U.S. Department of Justice announced indictments against two managers. Prosecutors alleged that the platform had processed at least USD 96 billion in crypto transactions since 2019, and accused the operators of engaging in money laundering and sanctions violations, among other activities.
Subsequently, Tether, the issuer of Tether tokens, announced that it had assisted the U.S. Secret Service in freezing USD 23 million in funds related to Garantex transactions.
The frozen funds were held in the U.S. dollar stablecoin USDT. As the issuer, Tether can restrict transfers from the relevant addresses through the token's control mechanisms. Once funds leave the banking system and enter the blockchain, holders may still be unable to use them because of the issuer's freezing measures.
According to the U.S. Department of the Treasury's sanctions designation in August 2025, Garantex-related persons redirected customers and funds to a successor platform, Grinex, and used the ruble-backed A7A5 token to arrange continuity for customer funds. A7A5 is issued by Old Vector in Kyrgyzstan, and the ownership relationships of the related cross-border settlement company A7 involve the Russian bank Promsvyazbank and businessman Ilan Shor.
When Russian enterprises use U.S. dollar stablecoins, they can readily find counterparties willing to accept them, but they are also affected by the issuer's freezing measures. After switching to ruble-backed tokens, they must persuade overseas sellers to accept them and provide sufficient exchange channels.
In October 2025, the European Union's nineteenth round of sanctions against Russia directly covered A7A5 and its related institutions and prohibited transactions involving that stablecoin within the European Union. By October 2026, the United States in turn designated the A7 network as a sanctioned transnational criminal organization; the Financial Crimes Enforcement Network simultaneously proposed new transaction restriction rules, which at that time remained at the proposal stage.
After Garantex was investigated, funds shifted to successor platforms and ruble tokens, and the sanctions lists expanded to cover these new platforms and tokens. The settlement methods sought by Russian enterprises continue to change, and overseas counterparties, issuers and institutions handling exchanges can still affect whether payment funds can ultimately be used.
What China can learn from Russia
Advice from others may help one overcome one's shortcomings.
Changes in Russia's regulatory policy on cryptocurrencies have, to some extent, also raised practical questions for other countries equally concerned about capital flows and financial security: what difficulties can cryptocurrencies help a country solve, and what new dependencies will they create?
In particular, for China, which is deeply involved in international markets, what lessons can be drawn from Russia's shift in attitude toward cryptocurrencies and its choices regarding cryptocurrency mining, resident investment, and corporate settlement?
Mainland China's regulatory stance on cryptocurrencies is clear and has continued to tighten. The Notice on Further Preventing and Handling Risks Associated with Virtual Currencies and Related Matters, issued in February 2026, continues to prohibit domestic fiat currency-to-virtual currency exchange and related business, and continues to rectify mining. Overseas institutions and individuals may not unlawfully provide related services to domestic entities.
This notice also extends management requirements to overseas issuance: domestic entities and the overseas entities they control may not issue virtual currencies overseas without the consent of the relevant authorities in accordance with laws and regulations. For stablecoins pegged to the renminbi, the entities covered are broader: any unit or individual, domestic or overseas, issuing such stablecoins overseas must obtain the consent of the relevant authorities in accordance with laws and regulations.
Against this policy background, the most noteworthy aspect of Russia's opening of resident investment is how funds enter and exit. According to the Russian central bank's explanation of the new 2026 law, ordinary investors who pass a test may purchase, through each intermediary, no more than RUB 300,000 of highly liquid cryptocurrencies per year. Residents trading overseas must use overseas bank accounts; transferring coins purchased in Russia abroad must go through regulated intermediaries; and holdings of crypto assets recorded overseas must also be declared to the tax authorities.
Russia is attempting to have transactions that previously flowed to overseas platforms handled by domestic institutions that can be inspected and held accountable, while retaining declaration and intermediary requirements for cross-border funds. For China, which likewise attaches importance to capital flow management, the effects of Russia's new regime merit continued observation: for example, whether, once brought under regulation, actual transactions become more transparent, and whether regulators can grasp asset transfers, rather than merely adding a batch of registered operators.
Cryptocurrency mining raises the same issue. Miners use domestic electricity to produce Bitcoin, which, once placed in an overseas wallet, may be cashed out there. Russia's requirement to report output and wallet addresses is intended first to establish the source of assets and then to cross-check them against transaction and tax records; such records can provide additional grounds for investigation, but they cannot ensure that miners report truthfully, still less can a single registration form alone prevent capital outflows. By retaining crypto mining, Russia means that its tax and anti-money-laundering authorities have also taken on the work of continuous verification.
When China chose to phase out mining in 2021, it faced an existing industry of larger scale.
Estimates from the mining pool sample published by the University of Cambridge that year showed that China's share of global Bitcoin hash rate fell from 75.5% in September 2019 to 46% in April 2021, still close to half before the rectification. The research also observed that miners migrated seasonally between Xinjiang and Sichuan, chasing the difference in electricity prices between the dry and wet seasons. The phase-out of cryptocurrency mining in mainland China that year affected the global layout of mining farms.
When the National Development and Reform Commission explained the reasons for the rectification in September 2021, in addition to energy consumption and carbon emissions, it also expressly stated that mining provides limited impetus to the economy and industry, and involves money laundering, tax evasion, and cross-border fund transfers. To some extent, China's prohibition of cryptocurrency mining represented a comprehensive trade-off between industrial and financial management.
Russia's combination of mining farm registration and regional mining bans provides China with a reference for policy design: if, in the future, a surplus-electricity mining pilot is to be studied, it could first be limited to areas where the grid confirms difficulties in absorbing the power, with operating hours adjusted according to supply conditions and operations halted when supply is tight. The electricity used by mining farms could then be matched against coin production, wallet, and tax records to calculate the net benefit they bring locally. Such a pilot must be premised on national policy adjustment and explicit authorization; the current mining ban will not be automatically exempted merely because of local curtailment of electricity.
With respect to cross-border trade payments, for enterprises that collect small, high-frequency payments from overseas, fees and settlement speed affect whether the business can continue to operate. Russia's experience adds an unavoidable consideration: once external restrictions expand, how much of the banking and clearing arrangements available today can be maintained? Building more compliant payment collection channels in advance has value for day-to-day operations and also bears on whether an enterprise can continue to perform contracts under external shocks.
The stablecoins being piloted in Hong Kong, China, offer a concrete path to expanding payment options. On April 10, 2026, the Hong Kong Monetary Authority issued the first batch of stablecoin issuer licences to Anchorpoint Financial and The Hongkong and Shanghai Banking Corporation Limited. The HKMA disclosed that both initially plan to issue Hong Kong dollar stablecoins and have listed cross-border payments as a business direction, hoping to leverage their respective banking and partner networks to reduce clients' payment and collection costs.
After enterprises receive stablecoins, they often still need to convert them into fiat currency before they can pay local operating expenses. Once conversion is interrupted, the tokens received on the books may become unusable for procurement and payroll. Hong Kong's reserve and redemption requirements for licensed issuers are precisely intended to ensure that there is a clearly accountable party for continuous redemption. Overseas operating entities of Chinese enterprises may, within the scope permitted by local rules, study this type of payment collection method; where mainland business and repatriation of funds are involved, mainland regulatory requirements must still be observed.
Russia's emergency pivot has already shown that once banking channels become restricted, enterprises will bear very high adjustment costs in finding counterparties and organizing redemption. China has enormous overseas operating and trade needs; preserving a regulated experimental space during normal times helps reduce the cost of being forced to find a path on an ad hoc basis in the future.
However, how much autonomy stablecoins can provide requires continued inquiry into whom they depend on. US dollar stablecoins are constrained by issuers and their reserve and redemption arrangements, and Hong Kong dollar stablecoins are also situated within the Hong Kong dollar linked exchange rate system and the banking system. The circulation of on-chain crypto assets is relatively free, but because of the centralized issuance mechanism of stablecoins themselves, there remain problems of obstruction upon freezing, foreign exchange conversion, or redemption. The strategic value of Hong Kong's experiment may lie in accumulating more payment options and operational experience capable of withstanding broad sanctions shocks.
Conclusion
Looking back at Russia's crypto past, one can see how a country continuously adjusts its response strategies amid industry changes and international competition. The central bank initially worried about capital outflow and advocated banning coins; war and sanctions made foreign trade settlement urgent, and the government began to arrange institutional channels for mining and crypto payments. The strongly centralized government's concerns about decentralized crypto assets have not disappeared, nor can they disappear; rather, as external pressure and domestic needs change, it decides anew which uses can be opened up and which must still be restricted. This response can be passive, or it can be proactive preparation.
