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Mining Bitcoin or the ‘Crypto-Ruble’ Just Another Form of Counterfeiting, Claims Russian Banking Chief

Last Updated March 4, 2021 2:53 PM
Yashu Gola
Last Updated March 4, 2021 2:53 PM

The head of VTB Bank, a major Russian financial institution that sees the government as its majority shareholder, has compared bitcoin mining with counterfeiting.

Andrei Kostin, who serves as the president and the chairman of the management board of VTB Bank, said Monday during an event that any person who prints digital money to replace Russian Ruble was counterfeiting the state-backed fiat. According to Russian news agency TASS , the 62-year old banker also declared that he put central bank digital currencies in the same basket of decentralized cryptocurrencies, adding that:

“I’m not a big supporter of crypto-ruble. For me, this is some kind of counterfeiting. A person who sits and mines is the same as a person sitting and printing money.”

The comments followed The Russian Association of Cryptocurrency and Blockchain’s announcement of launching a state-backed Crypto Ruble by mid-2019. The Putin government had taken those steps to circumvent US economic sanctions. Meanwhile, it had established that Crypto Ruble would be a bitcoin-independent, non-minable asset that would be straightforwardly pegged to the real Ruble, per a report  of Forklog, a Russian language bitcoin news agency.

No Takers for Cryptocurrencies

Kostin also settled that cryptocurrencies did not have an established market to sustain itself in the long run. He presented cryptocurrencies as a phenomenon that went out of trend because of its lack of utility.

He added:

“I think that there was such euphoria at first. Everyone thought that tomorrow everything would be calculated in cryptocurrencies. But it is not happening yet.”

By the end of 2018, the cryptocurrency market had established one of the longest-running bear cycles in its history. During the negative trend, the crypto market capitalization, which included the valuation of top coins like bitcoin and ether, had lost one-third of its value. According to statistics, the 2o18 crypto crash was worse than the infamous Dotcom bubble of the late 1990s.

Crypto enthusiasts turned to 2019 for better results following regulators’ attempt to regulate the market and make it more suitable for large investors. However, Kostin believed that all those efforts would not yield any desired outcomes because of the intrinsic nature of cryptocurrencies.

He’s quoted as stating:

“There are a lot of negative factors. I’m not talking about the fact regulators consider cryptocurrency dangerous from the point of view of money laundering, terrorist financing, etc. Today, both the Fed and the ECB regulate the cryptocurrency market with monetary policy instruments. But, in the long run, it would be impossible. There is no mechanism for regulating the cryptocurrency market. The potential threat is, if this market, while small, becomes a city of the dominant “

Grey Area for Crypto

As the course of press statements about bitcoin continue, the cryptocurrency sector as a whole remains mostly unregulated under the Russian Federation. In November 2016, the Federal Tax Service of Russia said that bitcoin was “not illegal.” However, in September 2017, the Russian central bank head, Elvira Nabiullina, said that bitcoin was not equivalent to money, which means people could not use the digital currency to purchase or sell goods and services.

Russia’s telecom regulator in 2017 banned bitcoin market websites.

In 2018, Russia’s crypto sector saw major developments as lawmakers decided to draft a new legal framework for their industry. In May, a cryptocurrency and blockchain legislation passed its reading stage through the Russian parliament. However, it was sent back for additional modifications.

In January 2019, the chairman of the upper house of the Russian parliament requested lawmakers accelerate their work on preparing a crypto regulation bill.