Ruskies, Sanctions, And Bitcoin - Coincidence?

By Chris at

Hands up if you've got kids.

This is how it works. And tell me I'm wrong.

Your progeny sees something, wants it, and whines asks for it. Could be an ice-cream, a fluffy toy, or that juicy sandwich you just prepared. Sometimes they get it, often they don't. Time progresses and your tolerance regresses.

"Daddy, I want...."


"But you don't know what I want."

"The answer's still no."

It's as automatic as your knee flex when Dr. Sergei brings out his little rubber hammer and pops you on the knee. Boing. No!

Automatic responses come from habit, and habit is, at least initially, a function of risk and reward.

This is bureaucracy in a nutshell.

Let me explain...

Take Mikhail, a middle aged bureaucrat, who, through a combination of lack of foresight and time working for the beast, has had all the life and common sense sucked right out of him. Innovation and risk are as foreign to Mikhail as sushi to a Masai warrior.

Mikhail's job pays him to tick boxes and ensure all boxes are ticked. Mess it up and he get a pink slip and the money for his kids' university and wife's shoe fetish stops flowing. Risk. Pain.

Along comes Ivan with something out of the box. A new business, in a new industry. It doesn't even fit in any of Mikhail's boxes. Risk. Pain.

Dr. Sergei's hammer. Boing. No!

Ever wondered why countries with high levels of bureaucracy never have much innovation?

Think about it...

If Mikhail says yes and it works out, Ivan gets a yacht and Mikhail gets to keep his pension. If he says no, he still gets his pension. If, on the other hand, Mikhail says yes and it fails and the finger pointing goes to him, he loses his pension. What would you do?

It's all risk, no reward for Mikhail.

So along comes Bitcoin, and governments (not just the Ruskies) initially banned it.

The Problem with Bitcoin

It's that nobody actually asked for permission from Mikhail. Permission wasn't granted but then it was never needed. A protocol doesn't give an "isht" about any central authority and can't be argued with. That'd be like arguing with soil.

When Sophia in Moscow wanted to use Bitcoin, she did. And when Yoshiko in Tokyo wanted to, she did. A government that said no-no, bad, dangerous, scary, only to have the kids go ahead and play in the traffic anyway, looked awfully like a eunuch - impotent.

The about turn notably from both Japan and Russia isn't because the paper pushers suddenly took a swig from the innovation and risk bottle but because they're largely powerless to stop it.

Providing Authority After the Fact

Imagine your snotty little kid Johnny, rather than asking you for something, simply going ahead and taking it.

Imagine further that there was absolutely nothing you could do to stop him. Would it not, at least ostensibly, be far easier to turn around and just say, "Oh no, it's OK. Johnny Snotnose has my blessing."

After all, suggesting it's not sanctioned would reveal a weakness, especially if you couldn't bring out the cane for Johnny.

Weakness, as mentioned last week, is anathema to leaders who rule with fear.

And so it is that last month, at the St. Petersburg Economic Forum, Vlad met with Vitalik Buterin, developer of Ethereum, where reportedly the Russian President viewed the technology as a "promising tool to assist Russia in diversifying its economy beyond oil and gas". According to a statement on the Kremlin’s website, Putin said:

“The digital economy isn’t a separate industry, it’s essentially the foundation for creating brand new business models.”

Now, before you sing with the choir of libertarians thinking Vlad just joined the ranks, just remember that along with all bureaucrats everywhere they will want their slice of the pie - a topic I discussed just the other day.


Far from banning Bitcoin and crypto currencies, Russia is now, via a politically connected (hey, this is Russia) oligarch, raising US$100m to mine crypto currencies.

Here's a question for you: What does Russia have a lot of?

Vodka? Yes. Brides online? Yes. But get your head out of the gutter, what else?

Energy, very cheap energy.

Mining cryptos requires cheap energy, something Russia has a helluva lot of.

Sure, there are other countries out there with cheap energy such as Saudi Arabia, but the problem with the Middle East... actually there are a lot of problems with the Middle East, but just one of them is that it's bloody hot.

This matters when you're running servers, which give of more heat than one of their suicide bombers. This makes mining farms in hot places an economically tough call. Russia, on the other hand, has both cheap bountiful energy as well as sub-zero temperatures. Perfect for crypto mining. Something you can do while swilling vodka and searching for a bride.

There is more...

Russia's central depository is building its own crypto currency wallet:

"Russia's National Settlement Depository (NSD), the central depository for Moscow Exchange, the largest exchange group in Russia, is developing a blockchain platform to provide deposit and settlement services for digital assets and cryptocurrencies."

These are significant events because they signify that crypto currencies are not only now being taken seriously by business but increasingly by governments.

Enter Geopolitical Tensions

Washington being brilliant just sanctioned Russia and managed to piss of both Vlad and Angela in one fell swoop.

This after accusing Xi of being a naughty boy and now pressuring him to "do something" about young Kim. This is the sort of fragmentation I promised you last year was the future with the incoming "strong men", and with fragmentation comes a deeper desire to de-risk one's position.

Tell me, if you were Vlad or Xi sitting on a pile of Benjamins, would you feel more or less comfortable?

Yeah, that's what I though, too.

Wiley buggers, those Ruskies.


Wow Poll 18 Aug 2017

Cast your vote here and also see what others think is going on

- Chris

"We can ignore reality, but we cannot ignore the consequences of ignoring reality." — Ayn Rand


Liked this article? Then you'll probably like my other missives on

this topic as well. Go here to access them (free, of course).



skywalker22 Thu, 08/17/2017 - 23:42 Permalink

In Vlad's mind,World reserve currency = slaveryCrypos = freedomCrytos are the future. Kinda like the internet. The ruling elite didn't understand how the internet would undermine their control when it was first invented. By the time they realized, it was too late to put the cat back in the bag (shut it down), so they redoubled efforts to control and manipulate it to serve their goals. The cat is also out of the bag with cryptos. My guess is that they are starting to wake up to this fact and frantically trying to figure out how to control the cryto space to serve their ends.

wildbad PrivetHedge Fri, 08/18/2017 - 05:57 Permalink

TPTB WILL control all cryptos. Otherwise it would not be allowed. They were somewhat backfooted, but now will embrace them and control them and call them their own.

I know, I know they can't break the fundamental encryption base...true for the moment. That is not how they will own it.

They can buy it.

Yes there will be competition, but that will be made illegal.

Until they have mastered quantum techniques which will make current cryptography silly the way they will own this is via a combination of declaring it illegal, purchasing it themselves en masse and underminiung the protocols which support it.

End the fed and and the government.

In reply to by PrivetHedge

1.21 jigawatts Thu, 08/17/2017 - 23:49 Permalink

They're gonna try to use this as proof that Vlad is anti-Semiticcuz he's not using the pre-approved vessels. Then they're gonna mention the Holocaust. Rinse, lather, blah blah blah

GeezerGeek hxc Fri, 08/18/2017 - 13:36 Permalink

Hard disks store data in magnetized areas, no as electrons.My preferred bullion coins are arrangement of proprietary aggregations of protons (79), neutrons (118) and electrons (79) arranged together as a hard disk. Okay, they don't usually spin and they don't suffer head crashes, But who ever worried about his computer hard drive being made of plated tungsten?

In reply to by hxc

Suleyman Fri, 08/18/2017 - 02:39 Permalink

The new free market world money. It's easy, you control it just like you do physical gold. You don't need to buy whole coins, you can buy any fraction of a coin you wish. Also have a look at Bitcoin Cash, the new bitcoin, same as the old bitcoin. It *is* the old bitcoin. It is good.

NumbersUsa Fri, 08/18/2017 - 03:19 Permalink

Yes so-called israel is certainly a racist state. The dumbed down Christians in this country support a self proclaimed marxist zionist kabalistic monster called israel, while at the same time a Christian who tries to share the gospel with a citizen of israel runs the serious risk of being arrested fined and jailed for up to 5 years (israels anti-Christian law). Look it up you dumb Christians and wake your selves up out of your zionist brainwashed ( jews are the chosen people) stupor. God divorced them, because of their continued whoring after idols like the star of david & rempham. Jesus said to the jews " you are of your father the devil and where I go you can NOT come. St Paul said of the jews " they are your enemy for the Gospels sake" He said again that "they are contrary to all men".Jesus again said of the jews " you cross land & seas to convert one and when you do you make him two fold more the child of hell than ye yourselves" and on and on. Any one who practices judaism is an anti-Christ period end of story. Its talmudic teachings are so bereft of God and righteousness that Jesus said they were the synagogue of satan. You dumb Christians better start reading the Bible you claim to believe in and recognize that the jews are you enemies. They created fund and man such organizations as AIPAC, ACLU, ADL SPLC, JWC, CFR, & NAACP, and many many other anti-American and Anti-Christ organizations that have been sytematically destroying our country from the inside while you dump Christians wave your star of rempham... oh star of david flags like a bunch of anti-Christ hugging zombies. Wake up you deceived Christians, Actually read your Bibles and search your history for the truth & not what the jewish media machine pumps down your throats. You probably don't even know that most all your so-called Christian publishing houses are owned by the jews, why do you think the NIV Bible strikes out the "Blood" of Christ in 10 plus verses, because rupert murdoch owns it that's why

UndertheDRADIS NumbersUsa Fri, 08/18/2017 - 09:32 Permalink

This is the results of Christians not actually reading their Bibles. The New Testament is very clear as to how the Jews were the original oppressors of Christians. If you are of the TL:DR persuasion, you can read the Book of Acts and get the gist. The only English Bible version that has not been Bowdlerized is the King James.

In reply to by NumbersUsa

The Divided St… Fri, 08/18/2017 - 08:20 Permalink

I laugh at those of you bitching about cryptos vs gold...
Most of you will be dead in 20-30 years anyway. It's your fuckhead kids and grandkids that are REALLY going to feel the pain

Mustafa Kemal Fri, 08/18/2017 - 09:28 Permalink

Despite what anyone thinks about BTC and tulips, Cryptos are on the way and many up top are starting to pay attention. And those darn ruskies appear to be the first state to see its potentialOn the other hand, the IRS has not as of yet, because they have not even given any guidance how you would calculate capital gains, they just say "its a commodity"The articles main point that there is rising a new geopolitical force regarding cryptos is correct, IMO Factor it in. 

libertyanyday Fri, 08/18/2017 - 11:12 Permalink

Bitcoins fascination lies in newness of a different flavor of fiat.  A fiat that has not been avail before the internet craze and a fiat that ONLY exists because of the internet. CB's will never accetpt bitcoin as ' payment for debts public and private ', they will never put themelves out of business .    Turn off power and say goodbye to all your wealth.  Once the move to digital fiat your wealth is as the whim of the govt. What makes a transaction between here and there better with btc than with paypal,  western union.......etc.  Those that accept it , immediately transfer to the local currency . the blockchain is just a way to file taxes unknowingly

culater (not verified) Fri, 08/18/2017 - 11:40 Permalink

Your assumption that cheap enegry is a driving factor for Russia to mine Bitcoin is simply wrong. The current "Proof of Work" consensus method of Bitcoin and Ethereum is just one of many, and already considered the least favorable. Ethereum plans to change their system to a different method as soon as the software is ready. Bitcoin is just a conceptional proof for things to come regarding blockchain technology and decentralised systems in general. It won't work for the mainstream, it lacks performance. The specialty hardware to mine Bitcoin is currently the most important factor, and that is made in China, 100%.It all goes a lot deeper and is by far more wicked as it seems. The next generation of crypto is going to change our society with an even bigger impact than the internet has.