THE BELL WEEKLY: The viral crypto hamster game with Russian roots

Hello! This week we look at how a viral game featuring a Hamster CEO with Russian roots is providing a boon to Telegram’s crypto ambitions. We also speak to a former finance ministry official about the hidden reasons behind Russia’s tax rises, and explore why hearings in a hugely controversial court case have been closed to the public.

Hamster Kombat takes Telegram by storm, helping app’s crypto ambitions

A Russian-developed mobile game linked to the world of cryptocurrency has proved a mega hit for Telegram, providing a big boost to the app’s founder, Pavel Durov, and his own blockchain project. Hamster Kombat, a simple game in which players pound their phone screens to generate virtual currency, has surged to 150 million worldwide users. The Bell looked into its mysterious origins and talked to sources close to the game and Telegram about its future.

• The premise of Hamster Kombat is simple enough. Users play as the hamster boss of a crypto exchange platform have to make it as profitable as possible. That starts off as repeatedly pressing a picture of a hamster to earn in-game currency, though the tasks gradually become more complicated. The game is set up to maximize engagement — players need to be logged in for three hours a day to ensure they can advance, and missing a day means progress is lost.
• The game is so popular in Russia that as well as inspiring a host of memes (dedicated to lovers of “tapping the hamster”) it has attractedofficial attention. “It’s crazy. People are downloading Telegram just to play it,” said one of The Bell’s sources in the Telegram game market. The game’s official Telegram channel has almost 37 million followers and since May 24 its YouTube channel has gained more than 23 million views. There has been widespread media and blog coverage in Russia and Bloomberg even wrote about the “Hamster CEO,” as a possible “killer app” for the crypto industry.
• The game’s phenomenal popularity is easy to understand. Not only is it straightforward to play, but there is also the chance to profit once the in-game currency starts to circulate on crypto exchanges. A similar “clicker” game, Notcoin, hyped by Telegram founder Pavel Durov, has already delivered on that promise. In late April, almost six months after its release, Notcoin’s virtual currency started trading on the world’s biggest crypto exchanges. Experts say that top players could earn several hundred dollars for their efforts. Hamster Kombat is also believed to be preparing for a crypto listing, but there is no concrete information. Plus, only a select few will actually be able to cash-in: early adopters, influencers going big on referrals, and, of course, the game’s creators.
• The Bell discovered that Eduard Gurinovich, a serial Russian IT entrepreneur who set up the CarPrice and CarMoney online auto and finance platforms, had a hand in Hamster Kombat’s development. Telegram itself is also a major beneficiary of the game’s success, a source told The Bell. Durov and his service needs these kinds of games because they generate huge traffic, said another source close to the developers. The gaming audience is larger than Yandex, Russia’s leading search engine, and VK, its top social media platform, combined. 
• Hamster Kombat is “turning over” several million dollars in advertising revenues a day, one source claimed. Crypto exchanges are the biggest backers and pay when users click on links, watch clips or install wallets. “Basically, this is a huge advertising platform for crypto exchanges. There simply wasn’t anything like this before,” the source said. Exchanges pay handsomely for new users, with the going rate at more than $100 per person that signs up.

Why the world should care: 

For Telegram, viral clicker games are more than an opportunity to profit from the crypto advertising boom. They also help promote its own TON blockchain and the platform itself as a user-friendly alternative to the App Store or Google Play, another source close to Telegram told The Bell. Durov’s long-term vision is to create something resembling China’s WeChat, or a super app that offers different services within a single platform. On that front, Hamster Kombat’s success is the “biggest free advertising campaign in history,” one source told The Bell.

The hidden reasons behind Russia’s mega tax rises

Last month Russia’s finance ministry officially unveiled plans for the country’s biggest tax “reform” in over 20 years. The changes will mean higher taxes for business and Russia’s middle class. The Bell spoke to economist Oleg Buklemishev, a former head of the finance ministry’s department of international finance, about the hidden reasons why Moscow has decided to hike taxes and how, despite the official narrative, it will not promote “social justice” or “fairness.”

• The tax changes reflect a wholesale change in Russia’s philosophy when it comes to fiscal policy, said Buklemishev. For the last 20 years, the financial orthodoxy and core ideology was that Russia saved in the good years and then spent what it accumulated during rainy days or on grand investment projects. But this approach no longer holds up, because it is impossible to rely on being able to quickly raise funds to cover shortfalls without access to the Western financial market and convertible currencies. That means Russia can only fund planned new expenses by raising taxes. 
• Buklemishev is skeptical of whether the Chinese yuan, which has become a vital part of the Russian financial system since the invasion of Ukraine, can fill the gap. “First, this is not a convertible currency. Second, it's hard work placing yuan in liquid instruments that generate normal returns. Third, we don’t know what will happen with the yuan as a currency over any longer-term perspective, because it is managed slightly differently from any other currency in which we have invested,” he said.
• The authorities have made much play of how the higher taxes on wealthy earners and corporates will allow Moscow to fund new investments and boost social equality. But this talk about “social justice” and “fairness” is largely hot air, Buklemishev said. “If they really wanted to use taxes to fight injustice, they would need to introduce a greater tax-free threshold for low earners or a steeper tax scale ... It is stupid to ‘help’ the poor with taxes. The rich can be taxed.”
• Moreover, this could be just the beginning. Buklemishev expects further tax rises as and when the authorities need the money. However, he noted that under the current reforms, tax thresholds are not indexed to rise with inflation, meaning that the level at which higher rates kicks in will fall in real terms every year. That concept, known as “fiscal drag,” will give the finance ministry some leeway to scoop up more revenue without formally raising taxes.

Why the world should care

One of the merits of Vladimir Putin’s early days as president was the establishment of a flat 13% tax rate. It helped to wipe out traditional cash-in-hand payments and other tax avoidance wheezes that had proliferated in the 1990s. But the flat scale could not last forever, given the war in Ukraine and the prioritization of military spending. While hiding behind slogans of “social justice” to placate the masses, the authorities have to find new ways to fund the war.

Controversial ‘theater case’ moved into closed court hearings

A Moscow military court has ordered a highly controversial court case in which a playwright and director are accused of justifying terrorism to proceed behind closed doors, shutting off public scrutiny. The move came a month into the trial and after prosecution witnesses had finished testifying.

• Director Evgenia Berkovich and writer Svetlana Petriychuk, who have been detained for almost a year, are facing lengthy jail sentences over charges of justifying terrorism. The case against them is based on their award-winning play, “Finist, the Brave Falcon,” which tells the stories of women who traveled from Russia to Syria to marry Islamic State fighters. The production was based on real events and won several prizes at Russia’s top theater festival, the Golden Masks, which is supported by the Culture Ministry. Because the charges are related to terrorism, the case is held before a military court. 
• An FSB examination of the play concluded that Berkovich and Petriychuk deliberately created a “romantic view of a terrorist” to make him “interesting and attractive to women and girls.” Prosecutors also alleged the play discriminated against Russian men through its depiction of Sharia marriage. Berkovich and Petriychuk argue that far from justifying terrorism or Islamism, the play serves as a cautionary tale to young women not to be swept up by IS propaganda or travel to marry into its ranks.
• The defense was outraged by the prosecution’s case, and independent experts have likened their fundamental argument as akin to arguing that Dostoevsky’s Crime and Punishment “advocates the murder of old women.”
• The judge ordered the trial to be closed to the public due to “threats to one of the participants of the process”. The court did not specify who had allegedly been threatened. Since the prosecution has already presented its evidence, only the submissions of defense witnesses will be heard behind closed doors — a fact the defense said shows it was obvious the court is trying to limit public scrutiny and coverage of its arguments against the prosecution.
• A few days before the trial was closed, the court heard from an anonymous witness who had secretly filmed the show and handed the recording to the police. He acted on the advice of a Muslim friend from the North Caucasus and was motivated by a sense of “civil responsibility.” The witness, who spoke under the pseudonym Nikita, said that he saw “all kinds of justification for ISIS terrorists” in the play. “My conscience was tormented by the thought that there was such a play that advertised the values of radical Islam, that claimed that Russia was bad, our men are bad and over there they are all good,” he said in court.

Why the world should care

Ordering a high-profile trial behind closed doors means, at the very least, that the defense cannot present its argument in public. Only the prosecution, which is relying on an obviously biased analysis and an anonymous denunciation, will be in the public domain. Even had the hearings proceeded openly, it is unlikely it would have made a difference. Russian courts, especially recently, almost never acquit in cases connected with terrorism or extremism.