21:42 GMT24 July 2021
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    The Russian Communications Minister stated that Bitcoin and Etherium were not appropriate for Russia and the country should develop its own tool based on the blockchain technology.

    XIAMEN (Sputnik) — Bitcoin is not appropriate for use within the Russian economy since it is based on foreign cryptocurrency algorithms, Russian Communications Minister Nikolay Nikiforov said Monday, moreover adding that the country was capable of designing its own digital currency.

    "Bitcoin and Etherium are cryptocurrencies developed on the basis of foreign cryptography. Russia has its own cryptography school. I think that we are absolutely capable of creating a cryptographic unit, a tool, based on the blockchain technology, and work out concrete regulations to set the framework for the operations," Nikiforov told reporters.

    The minister also warned of "blindly worshiping Bitcoin," stressing that the currency is alien to Russia, as it does not use Russian cryptographic technologies. At the same time, Nikiforov gave assurances that he would not make any personal investments in Bitcoin.

    He also said that the Russian Ministry of Telecom and Mass Communications had developed proposals on regulating cryptocurrency circulation in Russia.

    "The proposals have already been developed, and they will be filed to the government," Nikiforov said.

    According to the minister, it will take months to work out the regulations for cryptocurrency circulation on the national level.

    Meanwhile, the Bank of Russia said it considers allowing cryptocurrency to circulate in the country or use it at organized trades to be premature as it carries a number of serious financial risks.

    "The Bank of Russia considers it premature to admit cryptocurrencies, as well as any financial instruments nominated or associated with cryptocurrencies, to circulation and use at organized trades and in the settlement and clearing infrastructure on the territory of the Russian Federation for servicing deals with cryptocurrencies and derivative financial instruments," the bank said in a statement.

    "Operations with cryptocurrencies carry high risks both during exchange transactions, including due to sharp fluctuations in the exchange rate, and in the case of raising funds through the ICO [Initial Coin Offering]" the statement said.

    Digital currencies, also known as cryptocurrencies, have no material form and global currency regulation does not currently apply to them. An unlimited number of anonymous sources can issue and use such currencies. Central banks worldwide have treated the phenomenon with caution, although some have started exploring the possibilities it offers and even developing their own cryptocurrency. Russia's Central Bank has received a number of proposals on creating a Russian national cryptocurrency.

    Blockchain technology is a distributed database, all replicas of which are regularly updated to add the information about all new transactions. Every time a transaction occurs, it is encrypted in a block, which is then sent out to all network users. Each block has a time-stamp and a reference to the previous block, which allows to establish the sequence of transactions. The data is therefore transparent and very difficult to change, which makes it a helpful security solution for any distribution or transaction processes.

    blockchain technology, etherium, bitcoin
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