10:55 GMT26 May 2020
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    Cryptocurrencies are one of the hottest trends in the current global financial market. They are being examined by Russian state regulators, banks, economists and investors.

    The capitalization of the bitcoin market, the world’s most popular cryptocurrency, has reached $6/5 billion. Bitcoin technologies are a rapidly growing segment of venture capital investments. In 2015, investors poured nearly $400 million into the Bitcoin ecosystem.

    Russian law prohibits payments in any currencies except for rubles, including Bitcoins and other cryptocurrencies.

    Transactions in cryptocurrencies are easy to track, but the end users are anonymous.. No mediators like banks or payment systems are needed for such operations.

    As a result, the system provides safety and anonymity of personal data which cannot be accessed by law enforcement agencies.

    The Russian Central Bank has underscored that this feature could be used for money laundering and funding terrorism.

    Nevertheless, the government is interested in cryptocurrencies.

    In early-2016, Russian officials made several negative comments against bitcoin. For example, Alexander Bastrykin, head of the Russian Investigating Committee, even proposed to criminalize the use of bitcoins and other cryptocurrencies. But the attitude toward bitcoin seems to be changing now.

    According to the Russian newspaper Kommersant, the Russian Financial Monitoring Service is considering a national cryptocurrency. It is expected that the Russian cryptocurrency would have its legal issuing institution.

    Many in the banking industry realize that cryptocurrencies are a tool to speed up and secure payments. According to experts, the Russian authorities are rather interested in the technology behind bitcoin – block chain.

    Among supporters of block chain technology is Herman Gref, CEO of Sberbank, Russia’s largest bank. According to him, block chains would change all industries, from banks to agriculture.

    The block chain is a distributed database that records bitcoin transactions. It could also be used for fast and safe operations with e-money.

    "This technology can validate transactions because the database is distributed among a certain number of participants," Stanislav Protasov, Senior Vice President of software company Acronis, told RIA Novosti.

    Each block contains a timestamp and information linking it to a previous block. The technology facilitates any operation between it does not require a mediator. Thus, transactions are safer and less costly.

    The key feature is that a block chain does not have a centralized host, like a central bank for regular currencies. Thus, cryptocurrencies are issued within block chains.

    The Russian government has two principal goals – to control the issuance and ban anonymous participation in block chain transactions.

    "Let’s imagine. The ruble is no more. There is only a cryptocurrency controlled by the government. In order to make transactions, you must register with your ID. All transactions then are accomplished in this cryptocurrency. This is much easier to track it than a paper banknote. This system would be absolutely transparent. This is what the government wants," Protasov explained.

    At the same time, the absence of anonymity and control over the issuing would reverse the basic concept of the block chain. Currently, the authorities are trying to figure out how to use the technology inversely.

    "There are chances that they may succeed," the expert said.

    However, the most important thing is that the cryptocurrency host is transparent.

    "Actually, it doesn’t matter who will issue the cryptocurrency. Regulation is the most important. Another important thing is equal-opportunity access to the market," Russian e-payment service Yandex.Money commented.

    According to the company, the block chain is a less costly, more reliable and faster technology for financial companies.

    "As for a customer, bitcoin is a regular currency," Protasov said. "A bitcoin credit card can be issued and used for payment at a grocery or online."
    The only difference is that a cryptocurrency cannot be converted into cash.

    Moreover, unlike regular currencies like the dollar or ruble, bitcoins cannot be issued limitlessly.

    Decentralized issuing creates risks that bitcoins would be used by terrorists and criminals. This is the main reason why the government wants to control the issue of bitcoins.

    According to experts, the possible issue of a Russian national cryptocurrency may be aimed at studying the block chain and creating a state-controlled cryptocurrency.

    In the long-term perspective, a cryptocurrency may become less costly for the and facilitate regulations. Then, the authorities may abandon ruble in favor of the national cryptocurrency, Protasov suggested.

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    Tags:
    crypto currency, banking, economy, Bitcoin, Russian Central Bank, Russia
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