bitcoinrussia

Putin embraces crypto and digital currencies

President Vladimir Putin has stated that Bitcoin and other digital currencies cannot be banned, as they will continue to develop regardless of the state of the dollar. From Russia's perspective, a currency that cannot be banned is particularly attractive. It is imperative that we embrace new financial technologies. What initiatives has Russia already implemented in this regard?
In a recent statement, Russian President Vladimir Putin asserted that Bitcoin and other digital currencies will continue to develop regardless of the state of the dollar. He considers the development of such new technologies to be an inevitable process.

For example, it is difficult to envisage a scenario in which Bitcoin would be banned. There is no obstacle to its development. It is equally unlikely that any government will be able to prohibit the use of other electronic means of payment. It is inconceivable that any government would attempt to prohibit Bitcoin or other digital currencies. This is due to the fact that these are new technologies. Regardless of the outcome for the dollar, these instruments will continue to evolve and develop in one way or another. "Because there is a drive to reduce costs and increase reliability," Putin said at the VTB forum "Russia Calling!".

"Russia is in the process of developing a legislative framework with the aim of clarifying the legal status of cryptocurrencies with regard to mining, investment, taxation and trading. "In light of the current geopolitical climate and the associated pressure on cross-border transactions, the potential for cryptocurrencies as a means of settling international payments is becoming increasingly attractive," says Nikolay Vavilov, a specialist in the strategic research department of the TR company.
Please be advised that as of 1 November, a law on the legalisation of mining came into force in Russia. On 29 November, Vladimir Putin signed a law that recognises digital currency as property. Income derived from cryptocurrency transactions within the threshold of 2.4 million rubles per annum will be subject to personal income tax at the rate of 13%, while any amount exceeding this threshold will be subject to a rate of 15%.
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Since September, some participants in foreign trade activities in Russia have been able to carry out cross-border payments in cryptocurrency in an experimental mode under the supervision of the Central Bank of the Russian Federation, according to Vavilov. However, there has been no information yet on the practical implementation of such payments.

Exporters have confirmed their experience of using cryptocurrencies in cross-border transactions. Furthermore, Maria Girich, an expert from the Russia-OECD IPEI Presidential Academy, notes that the idea of creating a platform for cryptocurrency settlements under the control of the Central Bank is also being proposed in Russia.

Conversely, Russia is developing a digital ruble based on new technologies. It is anticipated that it will be utilised not only in international settlements, but also in the federal budget system from 1 July 2025. Russia is continuing to develop the necessary infrastructure to make such operations more convenient for businesses and reduce costs. In particular, the plan is to introduce an experimental legal regime to allow banks to test methods of remote identification of clients. "Naturally, this must be done in a way that does not create any risks in terms of anti-money laundering legislation," Putin states.
Russia must support the development of cryptocurrency as a modern financial instrument. Its payment system is anonymous and not subject to sanctions from the US, EU or other countries. Furthermore, financial restrictions on external transactions represent a significant challenge.

The process of integrating bitcoin into the global financial system has already commenced. In many Arab and Asian countries, cryptocurrencies are becoming an accepted method of payment on a par with cash and non-cash forms. Following the inauguration of Donald Trump, this process is likely to accelerate. Trump has pledged to make the United States the global capital of cryptocurrencies. He has even suggested including bitcoins in the US gold and foreign exchange reserves, which he would value at par with the dollar, securities, debt obligations and precious metals. In light of Trump's threat to impose 100% duties on those countries that abandon the dollar in favour of the BRICS currency or any other, it seems likely that the idea of creating such a currency will be postponed indefinitely. "This will also help to promote cryptocurrency," states Vladimir Chernov, an analyst at Freedom Finance Global.

Another advantage of Bitcoin is that it can be used for payment immediately, whereas the digital ruble is still in the testing phase. To be viable, it will require establishing infrastructure not only in Russia but also beyond its borders, which may take a considerable amount of time, according to the expert.

"The next step is to introduce bitcoin payments for exports and imports as soon as possible, with the long-term goal of connecting the digital ruble."
The currency will need to be converted into other countries' currencies or even the US dollar to pay for exports and imports. It is possible that this will also be done through cryptocurrencies, as through a cross-rate, because it is technically impossible to track and prohibit such operations.

The digital ruble platform also offers the potential for foreign financial organisations to connect. However, it should be noted that the digital ruble and bitcoin are different types of payment instruments, according to Girich.

For instance, the FATF categorises central bank digital currencies as electronic money, while cryptocurrencies are defined as 'virtual currency', a distinct type of payment instrument. The digital ruble is no different from non-cash funds in our ruble accounts; it is simply a different, digital form of expressing the ruble. "The only similarity between cryptocurrencies and the digital ruble is the use of distributed ledger technology, as well as the ability to use such instruments for settlements," states Girich.

The key differentiating factor between Bitcoin and digital currency is the entity responsible for their issuance and governance.
The digital ruble is issued by the Central Bank of Russia and is backed by a non-digital form of currency (the regular ruble). Its value is dependent on the monetary policy of the Central Bank of the Russian Federation. Bitcoin is not dependent on the actions of central banks and regulatory authorities. Its generation is based on a pre-established algorithmic process, without the involvement of any central bank.

Transfers in digital rubles are fully transparent, while those in bitcoins are entirely anonymous.
It is not possible to rule out the possibility of a hacker attack on the centralised infrastructure of the Bank of Russia. However, it is now considered virtually impossible to hack the decentralised architecture and cryptographic protection.

In terms of volatility, the Central Bank can influence the ruble exchange rate through interventions, but it is unable to do so with Bitcoin. However, verbal interventions do have an effect, as evidenced by the significant growth and subsequent reaching of the $100,000 mark by Bitcoin following Trump's victory in the US elections. However, in practice, nothing has changed yet, according to Chernov.

It is worth noting that there are some legends about the volatility of Bitcoin. Bitcoin was first introduced in 2009, following the global financial crisis. Its value has increased from a few cents to tens of thousands of dollars. In 2011, Bitcoin demonstrated a growth rate of 1317%, followed by 5428% in 2013, 1375% in 2017, and a 64% decline in 2022. The most significant decline in the history of Bitcoin occurred between November 2021 and November 2022, with a loss of almost 80%. This period was marked by the collapse of several crypto exchanges and legal action related to fraud. However, in 2023, the Bitcoin rate saw a recovery, increasing by 157% and reaching $100,000 by the end of the year.