Russia’s stance on Bitcoin to support or prohibit?

Another country is uncertain about blockchain. Russia, a country known for its aggressive behavior and led by an egomaniac, has reportedly abandoned plans to establish a national cryptocurrency exchange, according to local reports shared on Crypto Twitter by Colin Wu of Wu Blockchain. Instead, it was reported that State Duma member Anatoly Aksakov said that the country will create rules that allow the private sector to operate cryptocurrency exchanges.

The plans for a government-run cryptocurrency exchange appear to date back to 2022, around the time when Russia President Vladimir Putin signed a bill banning digital asset payments in the country. At that time, the state’s legislative and central banks were in a debate over whether to regulate or outright ban cryptocurrency (an option preferred by the Bank of Russia).

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Since then, the Russian government has considered introducing an “experimental legal regime” that would open the door for cryptocurrency to be used in import-export deals, and has tasked “special organizations” with mining cryptocurrency and processing international crypto payments. The country has also come around to the idea of using stateless currencies like bitcoin and permissionless stablecoins to bypass international sanctions.

In a sense, Russia’s decision to scrap plans for a national cryptocurrency exchange, which always seemed to be unspecific or at least difficult to find on this side of the internet, and to potentially allow closely monitored companies to move in, is a perfect example of the rampant cronyism that has taken root since the collapse of the USSR. It also highlights the country’s strange position on cryptocurrency.

(For what it’s worth, English-language publications may have overstated Russia’s desire for a state-run cryptocurrency exchange or mistranslated the country’s previous plans to establish a national agency to license and supervise cryptocurrency platforms.)

Is it surprising that an autocracy has a conflicted approach to cryptocurrency, a suite of technologies that function to undercut middlemen and despots? Putin has imposed internal capital controls to support a weakened ruble, partly influencing his decision to ban cryptocurrency. At the same time, he has looked to cryptocurrency in his attempts to project power overseas. Cryptocurrency, being ungovernable, is a double-edged sword for the country.

See also: Why Russia Isn’t Relying on Crypto to Evade Sanctions | Opinion

Apparently, only recently have Russian leaders come to understand that the use of cryptocurrency is essentially inevitable, and that they would be better off creating regulations rather than bans, as my colleague Anna Baydakova reported in April. This is particularly true since Russia has effectively been cut off from the U.S. dollar-powered global economic infrastructure.

In fact, Oleg Ogienko of major Russian mining company BitRiver’s praised the finance ministry’s most recent move, saying that it would “minimize the risks of sanctions.” He added that private cryptocurrency exchanges would also “eliminate possible market monopolies” in a country known as much for its oligarchs as its vodka.

See also: Russia’s Gazpromneft and BitRiver Partner to Develop Mining Operations

It remains to be seen precisely which cryptocurrency exchanges will be permitted to operate, and what kind of internal controls they will be required to follow. Izvestia reported that the central bank would “probably” oversee these platforms (the Department of the Ministry of Finance for the Russian Federation may be another contender). It goes without saying that Russian cryptocurrency exchanges would be exempt from interacting with U.S. citizens and much of the world.

Cryptocurrency occupies a curious position in the world of international politics. For years, Russian citizens have relied on stablecoins like tether (USDT) to move money in and out of the country. And yet, by and large, neither the U.S. nor the EU have been overly concerned about cryptocurrency being used to evade their economic blockades.

Cryptocurrency is undoubtedly, increasingly useful for anyone worldwide seeking to protect their wealth from volatile fiat currencies or government seizure. However, the industry does not pose much of a threat to the current order. Cryptocurrency has a propensity for over-promising and under-delivering, particularly when it comes to disempowering The State.

Instead, the blockchain has become one of the most powerful financial forensic tools available to governments. Cryptocurrency is part of the reason why we have an estimation of how much North Korea earns from ransomware and internet attacks, and how U.S. investigators have tracked down digital-era drug kingpins. Although cryptocurrency represents only a small fraction of global crime estimates, every crime committed involving the blockchain becomes a potential honeypot.

See also: Who’s Watching? Crypto Market Surveillance and Why It Matters | Webinar

More importantly, crypto’s success in empowering individuals is precisely why it is less of a threat in aggregate. If Russia ever really thought crypto would be used for mass evasion of capital controls, then the country failed to consider either the UX/UI issues that prevent countless people from fully integrating into the crypto economy, or how thoroughly on-ramps into crypto can be controlled . Crypto can be incredibly potent for good or bad actors looking to skirt oversight who know what they’re doing, but is essentially a worse version of Venmo for everyone else.

Crypto functions mostly as a symbol – one that borrows heavily from the U.S. highest ideals of personal liberty and sovereignty. And so it’s a sad day when Russia slowly liberalizes on the industry as the U.S. works to blot it out .

The text discusses how the success of cryptocurrency in empowering individuals makes it less of a threat overall. If Russia ever believed that cryptocurrency would be used to evade capital controls on a mass scale, they overlooked the user experience issues that prevent many people from fully adopting cryptocurrency, as well as the ability to control on-ramps into the cryptocurrency ecosystem. While cryptocurrency can be a powerful tool for those who understand how to use it to bypass oversight, it is essentially a worse version of Venmo for everyone else. Cryptocurrency largely serves as a symbol, taking inspiration from the highest ideals of personal liberty and sovereignty in the United States. It is unfortunate that Russia is slowly liberalizing its stance on the cryptocurrency industry as the United States attempts to eliminate it.

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