I want to save money. Is cryptocurrency suitable? Can you buy something with it? 

What happened?

After the outbreak of the war, the Russians faced serious financial difficulties. They can only withdraw US dollars and euros from their foreign currency accounts (in whatever currency the account is) for a total amount of no more than 10 thousand dollars. You can buy currency from banks, but banks can only sell the currency that they bought from the population after April 9.

The “temporary procedure for operations with cash currency”, which is exactly what the Central Bank calls restrictions, was introduced until September 9. Some of the restrictions have already been relaxed, but nothing will prevent the regulator from tightening the measures again and extending them indefinitely if necessary.

Russians can transfer up to 10 thousand dollars abroad and take them out of the country. But there are several problems: some large Russian banks have been sanctioned and disconnected from the SWIFT system, and foreign banks often reject transfers because they consider the operation suspicious. There are money transfer systems, but the most popular ones have left Russia, and the limit on transfer amounts through them is even lower (up to five thousand dollars).

Visa, Mastercard and other payment systems have left Russia, which is why it is no longer possible to pay for many foreign services (for example, for Netflix). How to get paid for work (for example, orders for illustrations, design and installation) on some international platforms for freelancers (for example, the Upwork exchange).

Savings also suffered. The funds of Russians invested in securities were completely frozen for a whole month, and shares in most exchange-traded funds are still unavailable.

Once abroad, Russians also face problems: Western banks are in no hurry to open accounts without a residence permit or require large deposits.

Cryptocurrency helps solve many of these problems. We tell you how it works.

2

What exactly can you do with cryptocurrency?

A few important things:

• Pay for services that no longer accept Russian cards.
• Buy currency at the exchange rate that can be more profitable than the bank rate.
• Withdraw money abroad if you don’t have an account abroad yet. If there is one, but your Russian bank is under sanctions and money cannot be transferred from it, cryptocurrencies will help you circumvent these restrictions. And also exceed the limit for currency withdrawal set by the Central Bank (10 thousand dollars).
• Invest in the hope of increasing the rate of a particular cryptocurrency.
• If you are already abroad, you can make some purchases with cryptocurrency and transfer money back to Russia.
• Keep the funds, less afraid that the Russian authorities will block them, simply suspecting them of “extremism”, even without a court verdict.

3

Let me remind you, what exactly is cryptocurrency?

Cryptocurrency is, in fact, virtual money, operations with which occur not centrally through a bank, but immediately on many independent computers.

Any cryptocurrency has two main components: these are units of digital exchange — “coins” (coins) and the network within which the exchange takes place. These units can be transferred between wallets and exchanged on exchanges. The networks within which these coins exist are called blockchains, meaning “blockchains”.

The blockchain can be represented as a table in which each new operation with cryptocurrency is recorded as a new line. But you can only add new lines, and you can’t change or delete old ones. Each new line contains information about the previous one. These ” tablets “are on every computer participating in the cryptocurrency exchange, so all network participants monitor everyone, and ideally none of them has the opportunity to somehow change the entries in the” tablet ” and assign someone else’s to themselves.

This distinguishes operations with cryptocurrencies from banking operations that can be canceled and changed by the bank or the hacker who hacked it.

4

Where does cryptocurrency come from?

It is mined, that is, “mined” (from the English to mine). This is done by miners — these can be companies or people who use the computing power of their computers to solve complex equations. These calculations ensure the operation of the blockchain and create new “coins”. When a new unit is “mined”, the miner receives it to his wallet — this is his earnings.MORE DETAILED

5

What can I buy with crypt?

In theory, almost everything, but in practice often not directly and different — in different countries.

There are services that accept payments directly in cryptocurrency, but in Russia, after the law adopted in 2020, the use of cryptocurrency to pay for goods and services is prohibited. However, some ad platforms cooperate with third-party services that allow you to make such payments through an intermediary. In this way, for example, you can pay for a subscription to Spotify, Xbox, and Netflix via Bitrefill. However, to use the services themselves, you will have to install a VPN. You can also use cryptocurrency to support Medusa.

If you happen to be abroad, then you may be wondering that eBay and Amazon also accept crypt only through an intermediary, but you can use it to pay for some games on Steam and donate them to streamers on the Twitch platform.

It is best to pay in the United States, where you can legally buy real estate for cryptocurrency, if you prove the legal origin of the funds. There are marketplaces that accept payments in cryptocurrency: for example, Shopify, Overstock, CheapAir and Travala travel services.

Even in recent years, many companies have appeared offering Visa and Mastercard cryptocurrency cards — they can be paid anywhere, just like with regular bank cards. At the time of purchase, they change the cryptocurrency from the linked account to the currency in which the payment is accepted at the current exchange rate of one of the exchanges.

6

Can you buy such a card in Russia?

Unfortunately, not right now. And after the departure of Visa and Mastercard, already issued cards do not work on the territory of Russia — there is simply no one to process operations on them.

But in many other countries, you can use these cards to pay for any purchases. The payment itself is made in regular currency, so it does not fall under the current laws prohibiting the use of cryptocurrencies for payment.

Unfortunately, due to sanctions, even abroad, many services may refuse to accept Russian identity documents when issuing a bank card. But there are quite a lot of sites that offer them. If it doesn’t work out in one, you can try to find another one;

Chinese UnionPay is also going to launch a cryptocurrency card, but so far only on the South Korean market with support for only one native cryptocurrency, PayCoin.

7

Is using crypt for investment really a good idea?

As with all investments, it is impossible to give an unambiguous recommendation here. In the long run, cryptocurrencies have been growing. But like all other high-yield instruments, they are considered a risky asset.

In 2011, the bitcoin exchange rate exceeded one dollar, in 2014 it was trading at $ 400, in 2018 it was worth about 4,000, and now it is 40,000. Some even became millionaires by investing in bitcoin or other long-growing cryptocurrencies, such as ether (Etherium). But cryptocurrencies are very volatile and can fall by tens of percent. For example, those who bought bitcoin in November last year at the peak rate of 67 thousand dollars are now 40% in the red. Such instability is not suitable for everyone.

But there is a safer option — stablecoins, or “stable coins”. These are cryptocurrencies whose exchange rate is pegged to the dollar or other common currency. This means that a new unit of cryptocurrency is issued only if the issuer (the so-called one who issues the currency) has one ordinary dollar in a bank account or in another form, for which the issuer is ready to buy this cryptocurrency. This ensures its value.

There is an element of trust in the issuing company, since it is difficult to reliably check whether the amount of providing currency corresponds to the total volume of issued stablecoins.

The company Tether, which produces the first and most popular stablecoin USDT, was even fined by the US regulator for not being able to prove the full security of assets. Nevertheless, during the existence of Tether since 2019, the issuer’s assets have always been enough to maintain the USDT exchange rate equal to one US dollar, with a deviation of only a fraction of a percent, and the total capitalization of Tether has reached $ 82 billion.

Other stablecoins have also appeared, including the most popular ones — USD Coin (USDC) and Binance USD (BUSD), issued by companies associated with the largest crypto exchanges Coinbase and Binance.AND HOW TO CHECK IT?

If the issuing company has enough resources to buy back each issued cryptodollar, it will be as stable as the US national currency, and will depend on the state of the US economy and American regulators.

8

And what about the withdrawal of currency abroad with the help of cryptocurrency?

If you bought cryptodollars — you have already in some sense withdrawn money abroad.

At the end of February, the number of transactions for buying stablecoins for rubles increased significantly: only two billion rubles were exchanged for USDT (a type of cryptodollar). This is understandable. After all, dollars purchased in Russia after March 9 cannot be withdrawn until at least September, and only a limited amount can be exported or transferred abroad.

But you can safely trade cryptodollars on crypto exchanges, transfer them to those who are ready to accept payment in crypt and cash out money abroad.

9

Can cryptocurrency be blocked for Russians tomorrow in the same way as cards?

This is unlikely.

Unlike Visa and Mastercard payment systems, which are owned by private companies, cryptocurrency blockchains do not have an owner. The creators of these networks can technically refine the translation mechanisms, create software add-ons, but they cannot change the already recorded “blocks” and somehow stop the appearance of new ones. This means that if the owner of one wallet transfers cryptocurrency to another, the creator of the network will not be able to influence it in any way.

In addition, the wallets themselves do not have any link to the user’s country of residence or other personal information. True, sometimes their owner can be identified, but this requires special efforts

10

Convinced. How to buy cryptocurrency?

The easiest option is to negotiate with a familiar cryptocurrency holder and buy from him without any intermediaries. If there are no such friends or the amount is more than they have, you will need an exchange or exchanger. Everyone who wants to buy or sell immediately gathers here, so you can quickly find a suitable offer.

11

What is the difference between an exchange and an exchange?

Cryptocurrency exchanges and exchangers differ in much the same way as exchanges and exchangers of simple currencies. Exchanges often offer less favorable rates and there are more risks of running into an unscrupulous person who will try to get money from you and not transfer the cryptocurrency to you.

Exchanges are more reliable. They act as a guarantor of transactions between clients. But for this, you usually have to give up anonymity and go through verification: to give all participants guarantees, exchanges want to know that you are a real person. Therefore, you will need a passport or other identification document when registering. Exchanges can also cooperate with states, for example, by freezing accounts seized by a court order. Or enter your own restrictions.

12

Okay, I’ll buy it on the stock exchange. What should I do?

A convenient way is to register on one of the largest exchanges and buy cryptocurrency directly from the exchange. But now this method may not be available, because payment methods from Russia either do not work, or the platforms have stopped accepting them. Therefore, now the best option is, perhaps, to buy cryptocurrency from another user on the exchange. This is called peer-to-peer (P2P) trading.

Usually, transactions look like this: the buyer chooses which cryptocurrency and in what quantity he wants to buy — and what he is willing to pay for it (rubles, currency). The exchange (or exchanger) issues a list of offers-usually several dozen options, sorted by the exchange rate starting with the most profitable one. Each seller shows a trust rating: how many transactions are completed, how many positive reviews. So you can recognize someone who (yet) does not enjoy a good reputation.

By selecting an offer, the buyer confirms the transaction. Now they have access to the banking details that they need to use to make the payment. The exchange gives you time to log in to the banking app, check your bank details, and send them as a regular transfer. The exchange does not participate in this process, the buyer’s money does not pass through it, but it has already frozen the amount of cryptocurrency in the seller’s exchange account and is waiting for confirmation from him that he has received payment.

The entire operation takes no more than 15 minutes. When the seller confirms that the money has been credited to his account, the exchange will automatically transfer the cryptocurrency to the buyer. If there are any problems, the buyer can open a dispute, and a representative of the exchange will act as an arbitrator.

13

And if I still choose an exchange, what advantages will I have?

Only anonymity. Otherwise, everything is less convenient.

On the exchange, a purchase transaction can be completed in a couple of minutes — and in exchangers, sometimes you have to wait more than an hour for accrual.

Moreover, exchanges offer fewer guarantees: not everyone has mechanisms to freeze assets and confirm transactions. Often, the agreement is based only on trust in the counterparty — so it is very important to read reviews of the seller. The popular Bestchange service aggregates exchangers available in Russia. The service has a very well-developed system of reviews, which will help you distinguish an unreliable exchange from a proven one.

14

Can I pay in rubles or foreign currency from a Russian bank card everywhere?

No.

Cryptocurrency exchanges are companies that have an owner and management. On the largest exchanges, you can trade only after passing identity verification using documents, so they have data on the citizenship of users. And, for example, the Coinbase exchange stopped serving Russian users, and Binance became temporarily unavailable for Russians and imposed restrictions on Russian payment systems.

But there are many exchanges, not all of them require verification, and not all of them are so large and visible that they can impose restrictions under public pressure. And there is always P2P trading. Here are some major exchanges operating in Russia: OKX, Huobi, Cucoin, BitForex.

In addition to exchanges, there are exchangers — and there are even more of them, you can always find a suitable offer. You can also find out how to perform an operation in rubles using the Bestchange service.

15

Crypt purchased, where to store it now?

In a crypto wallet.

After the purchase, the cryptocurrency is credited to your account on the exchange. As long as the funds are on it, they belong to the exchange. It’s like money in a bank-it’s physically at the bank’s disposal, but the client believes that the bank will return it or transfer it to the right place at their request. Crypto exchanges work the same way, and this creates risks. For example, they can comply with the requirements of state regulators or block accounts for their own reasons. Therefore, for long-term storage, many people prefer to withdraw cryptocurrency from the exchange to a crypto wallet — it’s like withdrawing money from an ATM and putting it in a regular wallet.

Such a wallet consists of two entities — a program that gives access to unique keys from an address in the blockchain, and the address itself. Companies that create such software cannot get these keys themselves, so the funds in the wallet belong only to its owner.HOW DOES YOUR WALLET WORK?

16

Where can I find my wallet?

Download or buy.

Wallets can be “hot” or “cold”.

• Hot spots are connected to the Internet. You can log in to them from any device, and they are more convenient for regular use: they show the exchange rates of cryptocurrencies and the composition of the portfolio, allow you to make a quick transfer to the address, and sometimes provide opportunities for converting between cryptocurrencies or deposits for interest. But they are considered more vulnerable to hacking, just because they are connected to the Internet. If such a wallet is suddenly deleted or stops working, you can always install another one and use the passphrase to restore access.
• Cold wallets are autonomous storages that store keys to the blockchain address in the device’s memory and are disconnected from the outside world. This is the most reliable method of long-term storage. Some cold wallets require special physical devices to be used. They can be different — similar to keychains, memory cards, navigators, bank cards, or car keys. You need to buy them separately and keep them with you in order to get access to your cryptocurrency: the data is stored on the key device, without it you will not be able to make a single transfer. This is an additional layer of protection. And if you lose your physical device (or it breaks), you can often restore your wallet using the same passphrase. But before installing, it is still better to study the instructions and make sure of this.

Here are some ” hot ” wallets with Internet access:

• Trust Wallet
• Exodus
• Mycelium

And popular “cold” ones (you can restore access to them by using a passphrase):

• Ledger
• Trezor
• Safepal

By the way, if you want to buy cryptocurrency directly from a friend or acquaintance, you first need to create a wallet so that it can be transferred there.

17

How do I transfer money from the exchange to my wallet?

In short, enter your wallet address and click send. But there are three important points to consider.

First — cryptocurrency transfers are always irreversible. Transactions recorded in the blockchain cannot be canceled or changed, so if you make an incorrect transfer, neither the exchange, nor the wallet, nor the creators of the blockchain will be able to help you get the funds back. Therefore, rechecking addresses, amounts, and transfer network parameters is especially important in cryptocurrency payments.

Second — there are many different blockchains and additional networks in the world of cryptocurrencies, and transfers between them are not always possible. It is as if Visa and Mastercard used different money standards and direct transfers between them would be impossible, and the money sent would simply burn up. It is worth studying which networks your wallet works with and the selected currency.

There are several reasons for this. First, there are cryptocurrencies that do not have their own blockchain — for example, the Tether (USDT) stablecoin, which is always equal to the dollar. It can be sent inside one of three other networks — Etherium (referred to as ETH or ERC-20), Tron (TRX or TRC-20), and Binance Smart Chain (BSC or BEP-20). After buying USDT on the exchange, when withdrawing to your wallet, you need to select one of these three networks and check that the wallet supports it.

The second reason for the existence of different networks is that old blockchains take a long time to process transactions, transfers to them are slow and expensive, and this prevents the market from expanding. To solve this problem, “add-ons” have appeared over the original blockchains, which are called second-level networks.

For example, for the Bitcoin blockchain, the Lightning network has appeared, which allows you to conduct many instant and free operations between two addresses and only then record their result in the main blockchain. If you choose a wallet that supports Lightning, it will become cheaper to transfer bitcoin between the exchange and the wallet.WHY IS THAT?

Third — different blockchains affect the commission that the cryptocurrency owner pays for transferring their money. Some networks carry out a transaction very quickly, but they will charge you more money, while others will transfer money for a day, but you will not have to pay much. Your wallet will help you find your balance. Many of them have a function that helps you calculate the approximate commission. Before transferring large amounts, it makes sense to experiment with small payments and find the best ways to transfer your savings.

There are three types of commissions.

The first type is for trading on the stock exchange. They depend on the rates and size of a particular transaction, just like when trading through a broker on a regular securities exchange. They are worth thinking about if you plan to spend large amounts, starting from tens of thousands of dollars, or trade. In all other cases, the base rates are usually optimal.

The second type is a fee for depositing and withdrawing funds from the exchange, usually fixed. When using exchangers, there are no such commissions, but they are already included in the less favorable exchange rate.

The third type is the most difficult. These are fees for transactions in the blockchain. Since the blockchain does not have a single operator that registers all transfers, the commission is paid to those who verify the authenticity of the payment. This is the second component of miners ‘ earnings: they use the power of their devices to verify all transactions occurring on the network.

Commissions differ from network to network: in the Bitcoin network, for example, they are arbitrary. The person who wants to make a transfer chooses what commission to pay to the verifier. Theoretically, you can choose not to pay a commission at all, but then the miners will most likely not spend power on verifying this transaction and it will not be recorded in the blockchain, that is, the transfer will not happen.

Average fees vary greatly between networks, because newer networks use more efficient technologies that require less processing power to confirm an operation.LEARN MORE ABOUT COMMISSIONS

18

How can I cash out digital money?

The easiest way is to sell your cryptocurrency through the same P2P trading on the exchange with withdrawal to a bank account. When performing such operations on the stock exchange, it is better to choose your own bank account for crediting regular currency. If you exchange large amounts of money with withdrawal using the banking details of another person, the exchange may freeze the transfer, suspecting an attempt to launder money. Therefore, if you use cryptocurrency as a way to transfer savings abroad, it is better to have your own account in a foreign bank and use it in the exchange.

If you don’t have one, but have a Visa or Mastercard cryptocurrency card, then at least some of these cards can be used to withdraw cash from ATMs, even with a commission.

You can cash out cryptocurrency through special terminals-cryptomats. In Russia, there are also some of them, but in most of them you can only buy and only bitcoin — this method is not suitable for cashing out. But cryptomats are very popular in Georgia — only in Tbilisi there are 38 of them with support for different cryptocurrencies, most of them can be withdrawn in cash.

In Turkey, there are such services in several cities, but only three cryptomats in Istanbul offer cash withdrawals. There are seven terminals in Israel, two each in Yerevan and Tallinn, and one in Almaty. You can find out where cryptomats are located and what currencies are available in them on this site. Here you can also find cash registers for exchanging cryptocurrencies for cash – they are available in Istanbul, Riga, and Vilnius.

In most countries of Western and Central Europe, there are cryptomats in almost every major city. The exception is France, where only one terminal in Paris is suitable for withdrawal. But the easiest way to find a cryptomat is in the United States: there are about a thousand of them in New York alone, and 32 thousand across the country.

19

Is this all legal?

Depends on what.

According to the current Russian laws, cryptocurrency is equated to property. The law directly prohibits only the use of cryptocurrency as a means of payment, that is, the purchase of goods and services with digital money. But if you, for example, pay for Netflix with it, then you are not doing it directly and this should not be considered a violation.

In any case, it is very difficult to prove that you are paying with cryptocurrency.

And it is not forbidden to store, buy and sell cryptocurrencies, exchange them for other cryptocurrencies, or mine them. If it was stolen from you, the police and the court will try to return it to you — but only if you have declared ownership and all operations with cryptocurrency for the Federal Tax Service. If you have submitted such declarations, the cryptocurrency may be withdrawn by a court decision or in bankruptcy.

20

Do you need to pay taxes on cryptocurrencies?

There are still a lot of gray areas with cryptocurrency taxes. For example, you need to pay a tax on income from trading cryptocurrencies — 13% income tax on the earned difference. But it is not a fact that the state will find out that the money received in your account was from the sale of digital money. At the same time, there are no direct taxes on mining, which is defined in the law as the issue of digital currency.

Since the end of 2021, a complete ban on cryptocurrencies has been actively discussed in Russia. This initiative was made by the Central Bank, but it was not supported by the Ministry of Finance.

At the end of February, the Ministry of Finance proposed its own draft law on cryptocurrency regulation. If the initiative is adopted, the sale and purchase of digital currency will be legal only through banks when the client is identified. But so far there are no such restrictions.