Russia Emerging Black Market For Bitcoin

5 minute read

Posted by: Greg Miller

December 18, 2014

It has been clear that a black market for unregulated bitcoin would soon exist. Black markets emerge to serve the needs of human beings that don’t comply with governmental regulations. 2014 could be called the year of bitcoin regulation. Governments around the world have starting working towards, and even implementing regulation. The regulation is not just hot air as there has been cases of governments acting on this. In France, an unlicensed bitcoin exchange and the the couple running the exchange at the time have been in imprison. This was a short time after France declared bitcoin exchanges as financial situation that need to be licensed like any other. In matter of months, Russia has turned into one of the worse places to be a bitcoiner. While Ecuador, Bangladesh, Bolivia and other countries have straight out banned bitcoin, they have not went into the effort to create special rules to punish it or stop people from supporting it, like Russia has. Russia has decided to move very aggressively against Bitcoin.

Bitcoin is very popular in Russia. While there isn’t as much of a community or start up scene, for obvious reasons, many bitcoin news sites and exchanges can be read in Russia, alongside Chinese, Spanish, and English. This is because there is a lot of interest and activity from Russians. The market is certainly not as important as China or America but it is closer to the European market in its size. The bitcoin exchange, BTC-E, is the 794 most popular website in the country. That is very good! Other exchanges don’t even get close to that number in China or USA.

The reason why bitcoin is so popular in Russia is because bitcoin means financial freedom. There is no gatekeepers within the bitcoin payment system, and the coin is free from inflation. The ruble, Russia’s official government currency, is dramatically losing value right now. The ruble has been taking a real hit during Russia’s and Europe’s participation in a war of financial attrition against each other. Russia is trying to stop this flight of capital out of the ruble and into bitcoin – a government resistance and boarder less currency. Those qualities are great for a Russian facing Russia’s uncertain financial future.

Russia’s Oppression of Crypto-Currency

Russia until now, had been following the China approach. Be vague by banning the currency and then unbanning it. This keeps bitcoiners guessing and scared – buying regulators time as they try to find ways to regulate the unregulatable. Remember this is the same government who put a $100,000 bounty for anyone who could take down Tor. They are not exactly sleuths when it comes to technology or how to stop it. With the reversal of this past ban things look like they were starting to turn around for Bitcoin in the former Soviet Union, but since that time it has gotten much worse.

Russia Is Going To Ban Bitcoin, Again!

The Russian government took back their ban on crypto-currency but they are going to bring it back in 2015. Until now, it looked like Bitcoin’s stance in Russia was improving. During this time, the Central Bank of Russia did issue a warning against bitcoin, an improvement over a ban nonetheless. Now Russia is going to be attacking crypto-currency in more ways than just simply banning it.

All Media About Bitcoin Is Banned

Any form of media – forums, website, books, magazines, documentaries, etc. that contain information about crypto-currency will be banned. I mean this such an aggressive step it is almost hard to believe. This was issued by Russia’s media ministry earlier this week.

Fines for Crypto-Currency Use

The Russian government is also creating plans to punish crypto-currency use and creation. So far there are three fines – $1260 for individual, $1520 for officials, $25,200 for business. These are some harsh fees for dealing in some magical internet money. This will likely get worse as Russia moves forward.

Black Market Solutions

Russia’s moves are disappointing, but all this does is create opportunities for the deep web. When governments ban, black markets provide. Here are some possible ways the black market can overcome these restrictions.

Behind the Hidden Layer

The forums,and other sources of Russian crypto-currency information will not be shut down but instead it will move from a .com address to a .onion. These forums will thrive on the deep web! This allows the forums to avoid government oppression and be able to talk freely as they will be anonymous.

Illegal Exchanges

Exchanges could pop up on Tor for bitcoin. This would be a great solution to legal exchanges closing business off with Russian customers. Of course the main problem is the fiat. Banking is not an very anonymous service, there are other ways to move fiat and we know Russians are not afraid of giving and receiving bribes. The more pioneering corrupt cops might accept their bribes in bitcoin!

Underground Bitcoin

The most important thing when you on the wrong side of the law is to avoid centralization as much as possible. It keeps the operation going even if someone gets arrested. That is why the Russians will need a black market version of Localbitcoins. There is many possibilities for this to work. There could be a site just like a LocalBitcoins expect people communicate through PGP to set up meetings and geolocation (though, have fun trying with Tor). There might be more of entrepreneur type, who like drug street dealers in the west, but instead sell bitcoin. You might in strange and suspicious spots to quickly exchange the goods (bitcoin and fiat) and then go separate ways. You can also take a stroke of inspiration from the Argentine drug shops and do the same for Bitcoin. These shops are basically brick cells with a tiny hole. People come to the hole tell him what they want and put money in the hole – then drugs come out the other side. The hole is usually the size of a brick, which is big enough for a QR code right?

The Unofficial Policy

It is rumored that high level Russian hackers, carders, and other online criminals have a deal with the Russian government that makes they have impunity to the law as long as they don’t attack Russian business, institutions, etc or hurt their interests. We might see an unofficial policy with crypto-currency given to Russian cyber criminals and their associates if they start to use bitcoin heavily.

Give Them Hell

Well we are sad to see the Russian government be so tyrannical towards bitcoin, but we can’t to see the innovative solutions Russian black market entrepreneurs come up with. While Russia may be the first to such things, your European neighbors will soon join you as ITOM regulations take effect, but you will have pioneered this industry by then. We salute you and wish the best of luck with resisting financial oppression.

Updated: 2014-12-18