by Jamie Holmes
Russia looks to move to legalize cryptocurrencies by 2018 according to a report by Bloomberg. The article frames the acceptance of bitcoin as a way to clamp down on money laundering but could be a way for Russia to escape from a punitive financial system over the long run.
This move comes amidst close ally Iran dumping the US Dollar and Tehran Stock Exchange being the beneficiary of bitcoin, with a Swedish investment firm using the cryptocurrency to evade sanctions. The drift toward the acceptance of bitcoin in Russia is perhaps related to part of a wider drive to reduce American dominance in the fields of geopolitics and economics, with the BRIC nations setting up their own version of the World Bank in 2015, the BRICS Development Bank.
In July 2014, the EU imposed economic sanctions on Russia, in an attempt to cripple its economy in response to the crisis in Ukraine. However, later reports showed that Europe’s largest economy, Germany, suffered from the sanctions, seen as counterproductive by many. With wider acceptance of bitcoin, these affected German firms could have carried on business a parallel financial system, Bitcoin. Maybe the Russians are becoming more clued up to the potential of bitcoin to establish a new multipolar financial system. As the case of the Swedish firm investing in Iranian equity shows, bitcoin can render financial sanctions obsolete.
Russia’s central bank has been a net buyer of gold, increasing its position in the yellow metal since the early 2000s. Similar to gold, bitcoin bears no counterparty risk, and was predicted to be the sixth-largest reserve currency by 2030. The country’s move to legalize and regulate bitcoin could be in anticipation of greater adoption and lead to the use of the cryptocurrency in their foreign reserves.
“The state needs to know who at every moment of time stands on both sides of the financial chain,” Moiseev said in an interview with Bloomberg. “If there’s a transaction, the people who facilitate it should understand from whom they bought and to whom they were selling, just like with bank operations.”
The U-turn is a particularly good sign for the cryptocurrency and its future as in earlier years, the new technology was met with a frosty reception. For instance, in January 2016 BTCManager reported that Alexander Bastrykin, the Chairman of Russia’s Investigative Committee, was highly critical of cryptocurrencies in general and of bitcoin in particular. The plan at the time was to criminalize the production and trafficking of alternative currencies, but it seems Japan’s recent move, as well as China’s attempt to regulate the cryptocurrency, have shifted perception and brought bitcoin into a more favorable light.