Russian Miner Coin? Welcome to Bitcoin as Reserve Asset

With 20 megawatts of spare power and a desire to de-dollarize its economy, Russia is moving to take a slice of the Bitcoin mining market with Russian Miner Coin (RMC).


I’ve been chronicling for the past two months the story of how Russian President Vladimir Putin has embraced blockchain technology.  Just the other day I told you about the Bank of Russia and the Russian government developing Masterchain, an Ethereum-based system to streamline basic back-office banking and brokerage functions across Russia.

Now, we get the insane news that a Russian company, with strong ties to Putin himself, is developing a new cryptocurrency called Russian Miner Coin (RMC) which will be issued based on leveraging Russia’s immense spare electrical power, 20 Megawatts to be precise, and unheralded but substantial microchip industry to build a massive Bitcoin mining system.

RMC – Revenue Driven Investment

Holders of RMC’s will be paid 18% of revenue generated by the endeavor like a dividend.  Except, I want you to note the difference.  The payout is based on revenue, not bottom line profit.

Russian Miner Coin is holding a so-called initial coin offering, where investors will use units of ethereum or bitcoin to buy new RMC tokens. These new tokens will have rights to 18 percent of the revenue earned with the company’s mining equipment, according to a presentation posted on its website.

When I assess foreign stocks I ignore P/E because earnings are fungible thanks t ovagaries of accounting.  On the other hand, Price-to-Sales, or P/S, is a better measure because sales are sales and are a lot harder to play games with.

So, here, RMC is saying directly, that this is not a company designed to make the officers rich at the expense of the shareholders (coinholders).  No, this is a coin designed to be distributed far and wide and provide an income stream.

This is like an actor demanding points of the gross, not net, ticket sales for a movie.  It’s an enormous difference.

Geopolitical Bomb

More important is that this is a direct attack on the dollar reserve system.  Putin told the U.S. that there would be consequences for the new sanctions bill.

I wracked my brain for a few days trying to come up with something targeted and deadly.  Uranium export boycotts are too disruptive and only a last resort, like nuclear weapons themselves.

My initial thought on this is that it creates a major back-channel for foreign banks and companies to do business with Russia contravening the sanctions.  The coin itself can be built on whatever blockchain technology they want, including ones that utilize Monero’s ring signature system to create completely anonymous transactions.

As I said in a quick post on Steemit this morning:

This is a huge move to counter U.S. sanctions as well. It creates a new token that can easily move cross-border to settle trade that the U.S. can’t track directly. If you here anything at all about ring-signatures and Monero-technology in the context of Russia, you know this is how they are planning to get around sanctions.

Build a new crypto. Incentivize its distribution to the Russian people and banks by making it an investible asset that pays an initial return and then create an another alternative payment system to get around U.S. money laundering rules for foreign banks scared to do business with Russia due to the sanctions.

Not only does Bitcoin get potentially elevated to the level of reserve asset to reside right next to Russia’s enormous pile of gold that represents nearly 20% of M2 in Rubles at insanely depressed prices, but it also furthers the argument for Russia to be a destination for capital as the sovereign debt crisis unfolds.

Capital is flowing into cryptos at an astounding pace.  Governments are completely behind the curve in their adoption of this technology.  Russia under Putin is moving quickly to remedy this and now fully groks how it can help him acheive his goals for Russia’s financial independence from the U.S.

Lastly, if this proves successful, Russia’s new Bitfury chips that will power this system could see wide demand in the global mining market.

Sanctions are never a solution to the problem they intend to solve.  All they ever do it alter the  flow of capital into endeavors to get around them.  In this case, the opening up of the Russian microchip market into commercial applications that are not directly tied to its military and space programs.

You would do well to begin thinking about Russia as the U.S. post-WWII where it will be the recipient of an inflow of capital fleeing global chaos and the unleashing of massive economic forces within the country.

P.S. I would give my right arm for an English translation of the RMC presentation found here.  It makes me sad that I didn’t continue with my learning Russian after briefly doing so in college.


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11 comments

  1. Thanks, Tom, very interesting as always! How would an old geezer, who is baffled by all this crypto talk, make a long term investment in Russia. I ask because RSX, RSXJ and Gazprom are denominated in US dollars.

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  2. Dave, don’t be baffled get educated. Take some time, honestly. But, that said, if you’re still a UK citizen then you should be able to trade on the London or Frankfurt exchanges and buy Gazprom there, not as the ADR but the underlying stock. Also, I feel Russian sovereign debt is undervalued as the Bank of Russia has to cut rates, so there’s good returns to be had there. I wouldn’t buy the euro-bond issues, obviously. But, some brokerages should allow you access to some.

    Otherwise, remember, that the RSX,RSXJ and the ADRs are denominated in dollars, but trade relative to the MICEX and the Ruble. So, the USD price is a derivative of those two.

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    1. Thanks for the quick response Tom. I will try the UK route for Gazprom. I also tried to sign up at Coinbase.com (since I can link to it from Fidelity) but I had a horrible time with the photo ID part. I tried a passport and a USA driver’s license but neither worked. The “chat” help was useless – no human help. I felt uncomfortable with the process and I wasted a lot of time on this. Is there a crypto site you recommend that is easier and that offers REAL PERSON help? Perhaps I need a simple-to-buy ETF for bitcoin? Cheers Dave Smith.

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  3. Dave, I feel your pain on coinbase. I had the same experience but was eventually able to get through it all and buy some ethereum. The other exchange I would recommend but it is a lot more confusing is BItshares.org and it’s OpenLedger exchange. The reason is because it’s a full on trading platform but you will still have to go through full validation, i.e. with passport or ID. I haven’t done it yet, but intend to.

    But, I consider that more like crypto 201 vs. Coinbase’s crypto 101. No doubt the learning curve is steep. Don’t get discouraged. What is unfolding is too important.

    The problem with all of this is these companies are experiencing growing pains dealing with fraud, US. money-laundering rules and the like. The “wild west” days of crypto are ending and with that comes weirdness. You can get a person on the horn at coinbase, but I found them to be just as unhelpful because they have no leeway.

    Moreover, I wouldn’t keep your cryptos in either your coinbase or Fidelity wallet. I would buy a Trezor (www.trezor.io) or a Leger hardware wallet for absolute security which keeps your coins on your person in the same way physical gold in your sewing kit would.

    Whatever exchange you use, you would be making a buy, waiting for it to clear and then transferring it quickly onto your Trezor for safe-keeping. My recommendation is to get a steemit account, hang out there and make a little money getting rewards (if you have the time) and transfer that off the platform to get comfortable with the tools… This is exactly what I did before putting any money on the line. I made $10, then used it to learn how to manipulate things. First I converted it to ethereum, then put it on my trezor and then moved it to Bitshares.

    I did this while I wrangled with coinbase’s customer no-service.

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    1. very comforting to know it’s not just me! BTW: my original comment was in reference to the fact that Russia is going crypto but in the USA I would have to own RSX etc in US dollars. So my poorly written question was asking about investing in a Russian “ETF”, or similar fund, but purchased/held/valued/sold in a Russia-friendly block chain currency.
      Thank you!

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  4. I would be a buyer of Ethereum if you want to have exposure to Russia’s value add to the token. See my recent blog post about Masternchain and how that is going to improve and professionalize the Russiang banking system and bureaucracy. Putin is serious about the blockchain and its potential to clean up corruption and streamline the workings of his government.

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