Russian media recently revealed plans to create a national cryptocurrency to be used alongside the ruble. The Federal Financial Monitoring Service’s (Rosfinmonitoring), released the plan to TV stations and newspapers across the country.
Deputy Director of Rosfinmonitoring, Pavel Livadny, hopes that the new currency will be more convenient for Russians, and reduce the costs related to financial transactions. At the same time, there are plans to ban all other cryptocurrencies, including bitcoin.
Rosfinmonitoring mentioned that they have already begun talks with major stakeholders in the future cryptocurrency; The Finance Ministry and the Central Bank. In stark contrast to Bitcoin, the plan for the Russian cryptocurrency explicitly says that it will have a central issuer in control over the currency’s supply.
This news comes at a time of impressively steady growth in the trading volume between bitcoins and rubles on the unregulated LocalBitcoins platform.
Volumes have nearly tripled this year, making record highs almost every week. Yesterday’s volume of 27.8 million rubles (~$421,000 USD) is over five times what it was a year ago, and a hundred times higher than 2014.
While LocalBitcoins is just one exchange available to Russians, it’s become the most popular amidst fears of bitcoin’s legal status. The exchange has a strict policy of not reporting information to state and taxing authorities. The peer to peer platform can also be used anonymously, and users can arrange face to face sales.
The Rosfinmonitoring plan includes licensing exchanges, using some kind of national identification in order “to minimize anonymous transfers.” Russian citizens would then be able to exchange national currencies for the electronic-only currency.
Daily cycles on LocalBitcoins have become a regular occurrence, suggesting that ruble traders are consistently converting bitcoins as part of their businesses each day.
Russia will not be the first country to attempt to monopolize their electronic currency, but it will be the first to issue a cryptocurrency instead of an electronic version of their existing, national legal tender. Typical e-currencies are different from cryptocurrencies in that the latter creates currency units that are cryptographically secured and proven to be unique.
Ecuador was the first country to create a national e-currency, and also banned cryptocurrencies and other digital currencies within their borders. Ecuador tether the payment system to the US dollar for stability, providing protecting their currency from being debased.
The purpose of the ban on other cryptocurrencies seems obvious to many, but is a point of some contention between president Putin and other Russian leaders.
Putin made his thoughts on cryptocurrencies clear last July in a statement to the press. He said that Russia’s central bank has taken a somewhat reasonable stance so far on cryptocurrency technology, focusing on exploring its applications. “[Bitcoins] are backed by nothing. This money [is backed by nothing], that’s the point, this is the major problem,” the Russian president said to the press.
While he states the use of cryptocurrency as money may be problematic, he also claims that the technology holds promise. “We do not reject anything, but there are serious, really fundamental issues related to its wider usage, at least, today.”
“However as an accounting unit, these ‘coins’ or whatever are they called, they can be used, and their adoption becomes wider and wider. As some kind of unit in some account, probably, it’s possible.” -President Vladimir Putin
A bill then made it to the Russian legislature, in January, seeking to put cryptocurrencies in the same category as “money surrogates,” which are already illegal. If it eventually passes, it will use fines as a deterrent for using and owning cryptocurrencies.
The bill has separate clauses to effectively make most uses of cryptocurrencies illegal and subject to stiff “administrative penalties” ranging from 20,000 rubles to a maximum of 5 million. It also calls for confiscation of all items responsible for the violation, such as mining equipment and the coins themselves.
It is not known at this time if this is the bill that will be used to make all other cryptocurrencies illegal should the new national cryptocurrency be issued.