Tipped off by SummitPost, which provides the following, though without a source, alas:
The roots of this myth go back to the violent schism of Russian Orthodox Church of XVII century. The Old Believers were persecuted and their prisoner labor has been widely used in Czarist Russia since late XVII century. An imperial decree of 1737 ordered their use at the Factories and Mines of the Treasury in Siberia. In 1762 another decree offered Old Order refugees in Poland assistance to resettle in Altay. Although escapes from the mines were severely punished, by early XIX century the secret villages of Old Believers abounded in the taiga of Altay.Old Believers, incidently, are alive and well. Mrs. Peculiar relates a story of one of her goofy, earnest Orthodox convert friends who noticed a picturesque Orthodox church somewhere in the upper Midwest and knocked on the door. He was answered by a harried, bearded fellow, who, after his visitor had tried to engage him in chat about contemporary American Orthodoxy, burst out, "Why must you yet be persecuting us?" And there are a fair number of them in Alaska. When I spent a stormy January week at a (non-Old Believer) monastary in the Kodiak Archipelago, we saw a fishing boat venturing toward the open sea in atrocious weather one morning. "Old Believers," the monks informed me, "They're always the ones heading to sea when no one else would set foot on a boat."
About the same time, Arkady Belovodsky, an impostor "envoy" from the Hidden Kingdom of Bolovod'ye, started preaching among the European Old Believers about his mystical, powerful country in the East, somewhere beyond China. The White Waters Land of Arkady's sermons retained pre-schism Antioch [sic] Orthodoxy, with seven hundred churches on a huge island. It had a distinctly Shambhala-like quality in that only the truly enlightened people could reach the White Waters.
Also about the same time, a splinter Old Order group formed the Community of Truly Orthodox Travelers, better known simply as the Runners. They moved from a safe house to a safe house using hand-written route charts.
By 1830s, these three developments crystallized together into the Old Believer quest for Altay Belovod'ye. Believers were trickling from all over Russia, guided by their route-scripts. Some sought the Hidden Land up in the highlands, where all the peaks where called, indeed, Whites. Other continued up Bukhtarma Valley and crossed the border with China. The Old Believers' searches for White Water Land did not abate until 1910s. Today's folk wisdom in Russia pretty much equates White Water Land with the White Peaks of Altay.