bne: Ukrainian cryptocurrency mining driven underground

Article published on June 26th 2018 on the bne IntelliNews website.

Unlike real mining, creating bitcoins is not an underground activity, but the legislative fog surrounding the business and the aggressive tax and security forces have driven it into the dark in Ukraine in one of the few sectors where the war-wracked country has the potential to be a world leader.

When officers from Ukraine’s security service barged in the flat of Anatoly Kaplan –the founder of Forklog, a news website focused on cryptocurrency and blockchain and based in Odessa– in December 2017, he quickly realized he had an option that many others in the country’s industry did not have: going public.

“It’s easier for a media, if it’s not working we can just move somewhere else. Others don’t have that option,” Kaplan told bne Intellinews. The SBU accused Forklog of being used by a criminal group to change bitcoins into hryvnia’s, despite the news website having no such functionality. Kaplan is now fighting the charges from Israel.

Since the price of bitcoin exploded in 2017, Ukraine has been booming with cryptocurrency and blockchain projects. But the frantic development of the local industry is hampered by legislative confusion and cases of pressure from law enforcement agencies, which has pushed most of the industry in the shadows.

In hiding

Since 2017, Ukrainian media have reported an increased number of cases against people or companies involved in the cryptocurrency business. In August 2017, Ukraine’s security service seized 200 computers in a Ukrainian institute used to illegally mine bitcoins.

The raid on Forklog, in which several hard drives containing cryptocurrency were seized, was not the first of its kind but attracted more media attention because Kaplan denied the charges. In March, Ukraine’s Prosecutor Office and the SBU claimed to have dismantled 400 crypto farms that were being used to finance separatist entities in the eastern part of the country.

Such cases have contributed to make Ukrainian crypto miners “extremely paranoid” while scaring away potential investors, a source closely involved in the country’s cryptocurrency industry told bne Intellinews. “All the big miners are hiding now,” he added, declining to be named because he is not supposed to talk to the media.

Read the rest on the bne IntelliNews website.

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