Russia U-Turn: Bitcoin Forex Trading to Be Legal, Mining Banned
From Russia with Bitcoin
Russian authorities want to equate Bitcoin to foreign currency, revealed Deputy Finance Minister, Alexey Moiseev, reports Ria Novosti. Moreover, while their issue or “mining” in the country would be prohibited, Russians will be able to nevertheless buy cryptocurrency and then use it or sell it abroad for profit just like forex trading.
He explains:
[…] Use will be restricted and the issue of foreign currency will be prohibited in Russia, but the [cryptocurrency] can be bought, put in your pocket and taken abroad. […] We are now refining the specific language in the bill so that purchasing as well as selling cryptocurrency outside of Russia for profit can be possible.
At the same time, Moiseev once again reminded that the Ministry of Finance is continuing to work on the draft law that would penalize users of Bitcoin and other cryptocurrency in Russia.
“Our goal is to stop the circulation of cryptocurrency in Russia,” he continued. “According to the constitution, the only currency in the country is the Ruble. Its only issuer is the Bank of Russia. Therefore, the issue of any other currency is illegal.”
Blockchain ‘Data Operators’ Protected
It is no secret that Russian authorities, including the Bank of Russia itself, are also interested in developing blockchain technology, particularly for data storage purposes. In fact, Russia has expressed interest in becoming a blockchain technology hub and developing its own domestic alternatives to smart contract platforms such as Ethereum.
Thus, much like their counterparts abroad, Russian officials are scratching their heads to come up with a balanced strategy that would retain the government monopoly over money on one side, while facilitating blockchain technology development on the other. With this in mind, lawmakers have been refining the specific wording in the law to exclude certain blockchain “data operators” from criminal penalty, according to Moiseev, who explained:
[…] Blockchain technology works so that bitcoins are always created as a ‘byproduct’ when it is used. Thus, it is clear that in these situations we must exclude data operators from this responsibility when issuing bitcoins so they are not at risk of being punished.
Bitcoin for Forex, BitRuble for Russia
At the same time, Russia’s Deputy Director of the Federal Financial Monitoring Service has been holding talks between the Central Bank and the Ministry of Finance on the possibility of using a national cryptocurrency, which some have dubbed “BitRuble.”
The BitRuble would be a far cry from the open-access Bitcoin network, however. Instead, it would be a centralized currency similar to the existing (digital) Ruble, but one that would be operated using a private blockchain that’s controlled by a single entity, i.e. the Bank of Russia.
Following the footsteps of Ecuador, which was the first nation to create its own sovereign cryptocurrency and officially ban all alternatives, a state-issued cryptocurrency could allow the Bank of Russia a new, cost-effective standard of money. Moreover, it could provide a potential workaround against the current economic sanctions imposed by the US and EU.
Still, many questions remain. For example, what does spending or selling bitcoins abroad mean exactly when the virtual currency exists online only? Would cryptocurrency be sold at official forex exchanges like US dollars or Euros? How can the authorities effectively enforce a ban on mining cryptocurrency? What kind of requirements would blockchain startups need to follow to be exempt from criminal penalties?
After two years in the making, Moiseev expects it to be submitted to the Duma by the end of 2016. But considering similar predictions in the past and the blistering pace at which the cryptocurrency space is developing, it will continue to present new challengesfor the authorities, which means that we could see many more revisions before the actual law passes.