Russians turn to cash and Bitcoin as coronavirus sinks economy

By Will Heasman

With the coronavirus sweeping the world, Russians are abandoning traditional finance in favor of cash—and Bitcoin.

Following strict tax measures on bank withdrawals of more than 1 million rubles, Russians have flocked to ATMs—hoarding cash like other nations stockpiled toilet paper. According to Bloomberg, one trillion rubles ($13.6 billion) was withdrawn in cash from ATMs in early March, on the very cusp of Russia's coronavirus lockdown.

At the same time, both signups and volume on Russian cryptocurrency exchanges began to surge. Speaking to Decrypt, Anton Kozlov, the account manager for Paxful's Russian market, revealed that March was a particularly good month.

"From September 1st, 2019 to April 1st, 2020, we experienced a +225% increase in the total number of monthly signups," Kozlov explained. "During this time frame, March saw our highest monthly signup rate ever for Russia."

Paxful only started to expand into the Russian market in September, says Kozlov. However, despite its nascency, trade volume has been significant—reaching a high of 3.7 million RUB in early March.

Paxful's RUB volume soars amid economic woes (Image: Coin.dance)

"Though still below our key Russia competitors in absolute terms, our RUB trade volumes have grown exponentially since the start of September 2019," Kozlov said.

This isn't an isolated incident, either. Per a recent study by cybersec firm Qrator Labs, traffic across Russian crypto exchanges increased by 5.56% in the last week of March.

Why are people switching to cash and crypto?

The embrace of cash and crypto appears to be driven by concerns around the country's financial sector. For Russians, especially, the looming crisis harks back to horror stories of the not-so-distant past. In 1998, the Russian economy crumbled, and survival strategies kicked in. Many attempted to withdraw and hoard rubles, but the banks had dried up.

Now, in the wake of the coronavirus, it seems Russians are once again prepping for the worst. The difference this time is, some are embracing crypto. 

Crypto exchange interest soars

Russia appears to be following a broader global trend. As reported by Decrypt, volume and signup rates on crypto exchanges worldwide have seen a massive surge since countries around the world began imposing lockdowns to combat the coronavirus.

Five exchanges saw a striking uptick in these metrics in early March, with some citing a tripling in new signups. Kraken, in particular, recorded an 83% rise in user traffic. Kraken's Bitcoin strategist Pierre Rochard told Decrypt at the time that this was a likely response to  mounting economic woes:

"With Western governments struggling to contain COVID-19 and forcing cities and nations into blanket quarantines, individuals feel an urgent need to get out of the centralized financial system," Rochard explained to Decrypt. "They can't go protest in the streets, so they protest with Bitcoin."

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