There are signs the Bitcoin business is booming in Russia, and the Bitcoin scam industry is booming right along with it.
According to peer-to-peer cryptocurrency exchange Paxful, new users grew 365% from May to May, with revenues up 350%. That hasn’t been hampered by the pandemic, with second quarter revenues up an average of 42% per month and July set to surpass that.
At the same time cybersecurity provider Qrator Labs reported a spike in new cryptocurrency scams in Russia, such as having users pay a fee to have their computers checked to qualify them to rent unused capacity to a mining group, according to Russian-language news site Kommersant.
That article said the crypto scams came as cybersecurity and anti-virus firm Kaspersky Labs reported a 300% year-over-year spike in broader internet fraud schemes in the first half of 2020.
As for Paxful, despite the rapid growth in bitcoin buyers and sellers, the overall number of users is still comparatively low, with an average monthly trade volume of $4 million, compared to more than $100 million in the U.S.
The industry might be ready to bloom there for another reason. Russia’s long-delayed law clarifying that cryptocurrencies have legal status—albeit a vague one—finally passed this month, with a regulatory framework still to come, Cointelegraph reported on July 22.
Beyond that, Paxful thinks its aggressive marketing in that market has been helped along by Russia’s moribund banking system and the coronavirus-damaged economy.
“COVID-19 has seemingly pushed people towards crypto and the increase in use may have a historic significance behind it,” Paxful CEO Ray Youssef told Modern Consensus via email. “The last time Russia faced an economic downturn in 1998, the people tried to withdraw cash, the banks seemed to have dried up. A turn to bitcoin could be to offset any economic damages that could occur.”
In addition, Russia’s “monolithic” banking system is pushing people towards cryptocurrency investments said Anton Kozlov, Paxful’s Russian market manager. “[T]he sentiment we get is that Russians are increasingly looking to find alternative ways to grow their earnings and participate in the financial markets,” Kozlov said in a release. “Bitcoin within the P2P context allows them much more freedom to do so—and our data is proving it.”