One of the most interesting things to look at when it comes to tracking Bitcoin adoption around the world is the current state of fiat currencies. In the past, we’ve talked about the current problems in Argentina and Ukraine, and now we can add Russia to the list of countries who are flirting with complete economic turmoil. Over the past few weeks, the Russian ruble has lost 11% of its value against the US dollar. When you annualize this inflation, you get an inflation rate of just over 90%. Most economists agree that 100% annualized inflation is hyperinflation territory, but everyone has their own definition of this specific type of currency crisis.
As Crimea is annexed by Russia, the Ukrainian peninsula is also going to adopt Russia’s monetary and economic system. One of the key points of this integration is going to be adoption of the Russian ruble. While the volatility of bitcoins is no secret, it’s interesting to note that bitcoins have actually been less volatile than rubles over the past week and a half. Even with all the fallout from the MtGox situation, it seems the bitcoin has found a somewhat stable value between $625-650. This is not to say that Crimea should be adopting bitcoins instead of rubles as their local currency, but the bitcoin’s stability after the collapse of MtGox has definitely been impressive. Once there is regulatory clarity around Bitcoin in most parts of the world and the early, problematic Bitcoin businesses are allowed to fail, it will be interesting to see if the bitcoin can compete with Russian rubles and Ukrainian hryvnias over the course of years rather than weeks.
We’re only 20 years from the era of post-Soviet economic reform where inflation was able to climb well over 2,000% on an annualized basis. The ruble was able to drop from 40 rubles per US dollar in 1991 all the way down to 5,000 rubles per US dollar in 1997. There is a long history of inflationary crises in this particular country, and it’s a shame that we still live in a world where an individual’s savings can be completely destroyed due to uncertainty in the local or surrounding countries. While international remittances are the key to Bitcoin adoption as a payment system, currency crises around the world could be the catalyst for bitcoin adoption as a form of money.
Like most other countries around the world, the legal status of Bitcoin in Russia is rather unclear. BitLegal.io currently refers to the Russian Government’s stance on Bitcoin as “contentious”, but the reality is that the cryptocurrency and payment system has still not been explicitly banned under Russian law. While Bitcoin is still in somewhat of a legal gray area in the country, it’s unlikely that anyone in the country is going to test the waters. The Russian Central Bank has already stated that businesses accepting Bitcoin as payment could be considered money launderers, and it’s unlikely that any business will be looking to accept legally-questionable forms of payment in a country with a 99% conviction rate. It takes a large amount of government power and freedom-infringing action to effectively ban Bitcoin in any country, but it looks like Putin’s Russia is willing to go down that road.
Last modified (UTC): April 20, 2014 18:28