The Shady Cryptocurrency Boom on the Post-Soviet Frontier

By October 29, 2019Ethereum
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Kurchugan power station
In Soviet times, the Kuchurgan electricity plant, just inside what's now the quasi-state of Transnistria, powered a swath of the empire from Romania to Ukraine. Photograph: Julia Autz

This story was supported by the Pulitzer Center.

At the edge of a lake on a fault line of the new Cold War stands a building that, depending on how you look at it, is either a relic of a failed revolution or the beating heart of a new one.

In Soviet times, the Kuchurgan electricity plant powered a swath of the empire from Romania to Ukraine. Today, its red and white striped smokestacks still loom over the surrounding cornfields, making ants of the workers who file out at quitting time. Recently the station and its adjoining town—planned to Soviet perfection—has been a stop on the nostalgia tours that have boomed across eastern Europe off the back of the HBO series Chernobyl. Kuchurgan sits not far from the blast site, just inside Transnistria, a wholly unrecognized quasi-state slivered between Moldova and Ukraine and marketed by its tourist board as the place where the USSR never ended. There are Russian peacekeepers, brutalist statues, streets named after communist heroes, and a steady stream of sightseers snapping shots of them all.

But although the tourists won’t guess it as they stand at Kuchurgan’s gates, admiring how the evening light reflects off the silver plaque of Lenin, this plant is pumping out juice to a modern-day gold rush: a cryptocurrency boom that is underway all across the former Soviet Union, from the battlefields of eastern Ukraine to time-warp enclaves like Transnistria and freshly annexed Crimea.

Around Kuchurgan, under a web of pylons and electricity lines, plots of land are being readied for cryptocurrency miners to build industrial farms. In a news story aired on Transnistrian television, Chinese investors gawp at the size of the empty warehouses where their servers could soon be housed.

“Yeah, perfect. I can play football here!” says one, as he gazes around an 11-acre shell.

Similar scenes are unfolding throughout the old empire, as a small army of developers and entrepreneurs use cheap electricity and abandoned buildings—the curios of their Soviet past—to get rich quick on cryptocurrencies.

This summer I set off across the fringes of the former Soviet Union to meet the people behind this crypto-rush. In towns where communist-era murals watch over crumbling pavement, I found geeks, tycoons, and visionaries—the libertarians of the old Eastern Bloc. Tinkering with cryptocurrencies is not just about technology or money, they told me; it is about creating a whole new decentralized system, where everyone and no one has the power. It is about ultimate liberty. It is about democracy taken to the extreme.

But in the post-Soviet crypto-verse I also saw how the promise of an unshackled financial order beguiles authoritarians, criminals, and terrorists—and how it has already greased the wheels of Russia’s attempts to influence US elections.

In Moscow, which is roiling under Western sanctions even if its glossy central streets don’t show it, Vladimir Putin flip-flops between publicly supporting cryptocurrencies and outright trashing them. In June 2017, Vitalik Buterin, the Russian-Canadian whiz kid developer of the Ethereum cryptocurrency platform, reportedly managed to convince Putin of blockchain’s charms during a chance meeting at a conference. Immediately, analysts told Vice, the Russian state development and central banks both launched blockchain projects. Four months later, though, Putin had changed his mind, denouncing cryptocurrencies as a “gift to criminals.” The head of the Russian central bank also changed tack, saying they were “the definition of a pyramid scheme.”

But Kremlin insiders say Putin remains interested—and that the Russian state is experimenting. “Putin is fond of new technology. He believes that Russia has no future without it,” says Vladislav Ginko, an economics expert at the Russian Presidential Academy of National Economy and Public Administration. “Medvedev just likes iPhones. But Putin actually understands that the future of Russia as a sovereign state is an issue of improving new technologies.”

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