The First Cryptorepublic. Why does Transdniestria Gravitates towards “Digitality”?

Home / Analytics / The First Cryptorepublic. Why does Transdniestria Gravitates towards “Digitality”?
In February, Transdniestria, following Belarus, legalized the mining of cryptocurrency. Experts are sure that soon Tiraspol will transfer its payments with the outside world into a “crypt”. At the end of last week, the media of Transdniestria were full of news about the “VI International Investment Economic Forum” organized by the authorities of the unrecognized republic. According to journalists, during the event in the capital of Transdniestria, the authorities of Tiraspol concluded several contracts with investors in the field of agriculture and the drug manufacturing. During the forum, as expected, there were a lot of talks. An interesting discussion was expectedly initiated around cryptocurrency and blockchain. At the beginning of the year, Transdniestrian authorities legalized the cryptocurrency mining. The local parliament adopted the relevant law in a short time, and in February it was signed by Transdniestrian leader Vadim Krasnoselsky. According to Kommersant Russians are planning to start cryptocurrency mining in Transdniestria, and the son of Russian Prosecutor General Igor Chaika, Yuri, who has studied the issue through “Business Russia”, is interested in the project. From the very beginning of the Transdniestrian cryptocurrency history it was argued in Tiraspol that mining would help to increase capacity of the Moldavian GRES. The largest power station may produce much more energy than it sells, and also it is owned by Russian Inter-RAO and uses Russian gas. The solitaire of Russian-Transdniestrian interests is expected to have been played on innovative ground. Skeptics, however, doubted both the consistency of the plan and the ability of mining farms to consume a significant amount of energy by the standards of a state district power station. Within one of the sections of the investment forum, the director of the local company «Technopark» Vyacheslav Chernikevich told about the first indicators of the “cryptocurrency industry”. “For the moment we have seven crypto mining farms in Rybnitsa, Bendery and Tiraspol. Among the investors there are seven foreign investors-residents of the free economic zone and two local ones. 32 workplaces were created. We consume 3.7 MW/h. That is not very much, but when you see the total cost and effort spent on its development, this is pretty enough for six months. The first revenue of this program was received in May”, - he said. Chernikevich said that the eighth farm consuming 7 MW will be launched soon, and by the beginning of next year the industry will reach consumption of 20-25 MW/h. Experts point out that this will allow to consume about 2-3 percent of the Moldavian GRES capacity - which is quite significant taking into account that the power station may supply energy to several countries at once: Ukraine, Moldova, Romania and Bulgaria. Over time, however, other reasons for interest by Transdniestrian leadership towards blockchain mining became more and more obvious. Experts suggest that Tiraspol will transfer its payments with the outside world into cryptocurrency very soon and will expand usage of digital capacities. During this investment forum in the capital of the “PMR”, for the first time there was raised the idea of creating its own cryptocurrency, and this initiative does not seem too utopian if you keep in mind the current problems of the Transdniestrian economy. Eventually, it is becoming increasingly difficult for Tiraspol to continue its independent foreign economic activity. Since 2006, the export of enterprises in the region has been under the control of the Moldovan customs authorities, which is considered in Transdniestria as an “economic blockade”. Soon Chisinau plans to extend jurisdiction to the eastern border of Transdniestria, deploying its customs officers in the Ukrainian checkpoints. There is another one problem which is the complexity of payments with foreign partners. The banks of Transdniestria do not have correspondent accounts in Moldova, and Chisinau and Tiraspol cannot yet agree on this issue, as the Moldovan authorities are not particularly interested in this. In this situation for the “PMR’s” authorities it would be profitable to transfer both the payments with counterparties and the course of development of the local economy towards “digitality” because cryptocurrency is not controlled by supervisory authorities, banks and customs of neighboring countries. Moreover, Transdniestria has an impressive stock of electricity for creating new digital farms. Some experts familiar with the situation around Transdniestria indicate a clear presence of Russian interests in the entire history of cryptocurrency which are more extensive than the commercial benefit of specific subjects. It is not for the first time that Moscow has tested the “trends of time” in the currency circulation sphere in the unrecognized republic: in 2014, coins made of circular and polygonal shapes issued in Transdniestria became a sensation. The new money was developed by the Russian “Gosznak” as an experiment with the expectation of introducing similar coins into circulation in Russia. In current conditions Transdniestria is becoming a testing ground for a pilot launch of cryptocurrency at the state level. In the Russian Federation itself, this sphere is not regulated at all and officially the “crypt” at the suggestion of the head of the Central Bank Elvira Nabiullina is considered to be something between the “financial pyramid” and the “money surrogate”. In fact, settling in Bitcoins and other cryptocurrencies becomes more and more popular, and it is extremely difficult to deal with their turnover. The experience of Transdniestria will predictably be useful to Moscow for the development of current legislation in the field of blockchain and cryptocurrency. As for the authorities of Transdniestria, for them the focus on the “crypt” is also the reason for the image of an investment-attractive region. Tiraspol is trying to improve the poor economic situation by attracting foreign investors, and the free circulation of cryptocurrency is a serious bonus for a certain category of entrepreneurs, as it allows conducting free settlements without reference to the banking system. If Transdniestria in the next year or two will become a serious “data center”, it will automatically turn into a “harbor” for the neighboring countries business interested in cryptocurrency operations. It is important, however, to see the reaction of Moldova and Ukraine to this extent: the governments of many countries still have not considered their attitude towards the “crypt”. It is even more difficult to do this when it comes to the first cryptostate.