It is currently a debate in Russia regarding cryptocurrencies and what use it is to the nation. In January, the country’s apex bank proposed banning cryptocurrencies in the country. The reason the Central Bank of Russia Federation gave for its proposal was that cryptocurrencies were a threat to financial stability, the country’s monetary policy sovereignty and the wellbeing of citizens. In the past, especially in countries where cryptocurrencies have been banned, the major reasons have included it being unable to be controlled by the government, is used to avoid and evade tax, launder money, fuel terrorism, among others.
While the Central Bank of Russia Federation proposes that cryptocurrencies should be banned because their meteoric growth is hugely dependent on speculative demand and that they exhibit characteristics of a financial pyramid causing them to be super volatile and automatically making them a threat to the citizens and the nation, the nation’s President Vladmir Putin is of the opinion that cryptocurrencies can be of great advantage to the nation because of a number of reasons including the country’s power supply capabilities that could boost mining activities. The President mentioned, while in a meeting with the apex bank and top members of government bodies, that “The Central Bank does not stand in our way of technological progress and makes the necessary efforts to implement the latest technology in this area”, adding that the central bank’s concern is only borne out of concerns that “the expansion of this type of activity carries certain risks, and above all for the citizens of the country, given the large volatility and some other components of this topic”.
The President isn’t the only one that feels this way about cryptocurrencies. The country’s Ministry of Finance has numerously spoken against a complete ban on crypto mining and trading emphasizing that the move would only be detrimental to the country as it would decimate the country’s ability to compete in the global technology sector.
Russia has a surplus of power and well-trained manpower which could be leveraged to create a thriving crypto mining industry in the country. This is one of the major points from the school advocating for letting crypto thrive. This school also opines that it’ll be of greater advantage to Russia if cryptocurrencies are not banned. They say that instead of completely eradicating something that could be of great use to the nation, the government and central bank should be looking at regulating the crypto space.
The country’s Minister of Finance Anton Siluanov has come out to suggest that banks should be allowed to sell cryptocurrency to the populace. He pitched, while resounding the Ministry’s position of regulating cryptocurrencies, that trading cryptocurrency should be legalized and made possible through banks. His suggestion came in a letter he sent to Prime Minister Mikhail Mishustin on Wednesday. According to Russian newspaper Kommersant, “Anton Siluanov’s letter provides an estimate of the volume of assets in crypto-currencies owned by Russian owners: this is about 12 million crypto-wallets with a ruble equivalent of 2 trillion rubles. (which is almost an order of magnitude less than the Bloomberg estimate of 16.5 trillion rubles). In fact, this is the price of the issue: apparently, several percent of the total savings of Russian citizens are now placed in cryptocurrency. These assets can either be legalized or retain their current status, which does not directly violate laws, but is also not supported by Russian law”.
What the finance minister is saying or suggesting in essence is that banks can be given the authority and licenses to provide cryptocurrency exchange services to the public. Businesses and other ventures that involve in cryptocurrency should be required to have a license and follow a guideline – this is where regulation comes in. Companies and businesses that refuse to get a license or continue to operate without a license can be charged with breaking the rules.
Although the President and the Ministry of finance are pushing for allowing cryptocurrencies to thrive, they and the central bank all agree that cryptocurrencies cannot become legal in the country like it is in El Salvador.
Bitcoin is currently a legal tender in Central American country El Salvador and can be used for buying and selling as well as paying taxes. The country has even gone as far as building an entire city based on Bitcoin and says the city will have its own infrastructure such as an airport. The move of legalizing Bitcoin in the country has been highly criticized by international bodies including the International Monetary Fund and the World Bank. The IMF has even warned the country to rescind its decision and delegalize Bitcoin as money.
Russia’s finance minister also added that if Bitcoin would be left to banks to sell to the public, the country’s apex bank and its anti-money laundering agency called Rosfinmonitoring (AML) must be given access to every information relating to transactions involving cryptocurrency and the Transparent Blockchain transaction tracking system must be employed.
According to Kommersant’s report, this approach would place cryptocurrencies on an equal level alongside precious-metal accounts in banks and other regulated investment tools, with obligatory know-your-customer and AML checks for buyers, taxation and regulated fiat on-ramps.
The finance minister also added that the 2 trillion rubles ($26 billion) worth of crypto constitutes a tiny percentage of the population’s total savings and that these funds will require legalization if the proposed regulation plans come into play. Mining and foreign cryptocurrency trading platforms which bring an additional 180 billion rubles ($2.3 billion) of tax revenue will require licensing to continue to operate.
The majority of the bodies that make up the Russian government have agreed on cryptocurrency regulation suggesting that it must take effect before this year’s close. This follows the report that the Russian central bank published in January demanding that cryptocurrencies and mining operations be banned in the country.
While the President, Vladimir Putin spoke to these bodies during a meeting held recently, he urged that the Bank of Russia find a common ground on cryptocurrency regulation, take into account how beneficial they are for the nation and come to a decision that places the nation in a good spot both internally and externally.
If Russia decides to allow banks to sell cryptocurrencies to the public, it’ll be a ground-breaking move for the cryptocurrency space and will add to the dwindling confidence that investors have for them.