Report: Moscow businessmen go to Kaliningrad to mine cryptocurrency

MOSCOW, Jun 20 (PRIME) -- A couple of businessmen from Moscow have decided to invest U.S. $50 million in the creation of cryptocurrency farms at two old plants in the city of Kaliningrad, Russia’s enclave, the Financial Times reported on Wednesday.

The entrepreneurs were looking to set up their own cryptocurrency mines, large data centers where specialized computers process transactions, consuming vast amounts of energy, in return for bitcoins. “The entrepreneurs decided to take not just one but both sites, with an investment of $50 million in the mines, a not inconsiderable sum for a region whose GDP is less than $7 billion,” the daily reported.

“Russia’s approach to cryptocurrencies is unclear – it had said it would ban them but its tone appeared to soften after Vladimir Putin met Vitalik Buterin, the creator of Ethereum, one of bitcoin’s rivals. What is clear is that Kaliningrad is very much open for business – and it doesn’t seem to mind what form it comes in.”

Surrounded by both the E.U. and NATO, but a member of neither, the region finds itself cut off from its neighbors, with any goods that it wants to export – the majority of which go to Russia – having to travel through two different countries in order to reach the mainland, 300 miles to the east.

Since 1996 though, Kaliningrad has been designated a special economic zone, meaning it can entice investors with benefits, including some duty-free imports, reduced social security premiums and various tax breaks. The federal government decided that as of the start of this year tech companies should be given extra tax breaks in Kaliningrad – exporting virtual goods across three borders is a lot easier than exporting physical ones.

As a result of this new regime, entrepreneurs such as the pair from Moscow will not have to pay income or property taxes for the first six years.

“Kaliningrad has become a kind of lab where we can test new initiatives and legislation. We think we could be a liberal Russian territory which is friendly for doing business, and a gateway to Russian markets,” said Vladimir Zarudny, director of the Kaliningrad Region Development Corporation, a state-owned entity whose aim is to bring business into the region.

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