Bank of Russia signals new attitude towards Bitcoin

Journalist:
July 5, 2014
Image from BitMine.ch

Russia has had a rather broad legal gray area for Bitcoin in the past year. On January 27 of this year, the Bank of Russia issued a statement that warned against money substitutes banned for emission in Russia. Similar to actions of many other governments, it cited anonymity in the facilitation of drug trafficking, money laundering and terrorism. In February, the Russian Prosecutor General’s Office claimed Bitcoin as a money substitute and therefore ‘cannot be used by individuals or legal entities.” The Central Bank has clarified, however, that there are no immediate plans to ban cryptocurrencies.

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This week, the Bank of Russia showed signs that it may be ready to legalize Bitcoin. Georgy Luntovsky, the Bank of Russia’s Deputy Chairman speaking on Wednesday at the annual International Banking Congress in St. Petersburg:

“We advocate a careful approach to bitcoin and are monitoring the situation along with the Bank for International Settlements.”

This may set a new direction for Russian authorities in dealing with the realm of cryptocurrencies, but we shan’t be too optimistic. This week as well, Russian lawmakers in the lower house of parliament have passed a new internet bill that tightens state control over their citizen’s use of the internet. This law, if passed by the upper house and approved by President Vladimir Putin, would require internet companies to store Russian citizens’ personal data and information in a Russian database. While it wouldn’t go into effect until September 2016, the Russian government would have the power to block sites that do not comply. Critics say it may really be targeting social networks from dissent, turning the internet into a China-like limited internet.

However, the words of Deputy Chairman Luntovsky are still positive: “At this stage we need to watch how the situation develops with these kinds of currencies. These instruments should not be rejected.”

He also said that the Central Bank of Russia is working closely with the government on the issue of cryptocurrencies. “Maybe at some time we’ll take a decision about the legislative regulation of this question,” he said. Furthermore, while he did acknowledge Bitcoin’s use in illicit drugs and weapons trafficking, but he summed it up nicely: ‪”It turns out that criminals start to use everything new.”

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It’s interesting, however, that Russia happens to have a pretty low use of Bitcoin. A quick look at Coinmap.org shows us that Russia may have very few vendors who accept Bitcoin. The entire nation has 10 registered stores. Of course, there may be many that are unregistered.

Russia, with only 10 registered vendors on CoinMap

But with the growth of Bitcoin, even in places like China, Russia’s public policy on Bitcoin and cryptocurrencies may have a smaller effect than expected. In the end, it’s not the currency itself or the laws around it, but the massive effects of the technology that is developing off of the Blockchain like DAOs.

In the end, this new attitude stands in a very stark contrast from January when the Bank of Russia had issued a very negative statement that warned Russians of Bitcoin’s anonymity in the facilitation of terrorism. Now, the minds may have changed at least a little, and that can mean a lot as Bitcoin goes through its growing pains.

Last modified (UTC): July 5, 2014 20:16

Calvin Tran @@clvnthbld

Calvin Tran is a filmmaker attending NYU's Tisch School of the Arts. He is interested in economics as a way to see the world and inspires him to create media that illustrates the power of freedom and technology in improving all of our lives.