Last week, an annual forum featuring Russia’s top people from the economic sector was held in St. Petersburg, and cryptocurrencies
were a hot topic there. Notably, government agents and state-controlled
businesses were vocal about their interest in blockchain, but seemed to
distance themselves from digital tokens.
Meanwhile, the
regulatory framework for cryptocurrencies is still missing in the
country, despite the fact that local authorities have been tasked to
prepare the needed amendment a while ago. So, where is Russia heading in
terms of crypto and blockchain?
Brief introduction to Russia’s relationship with cryptocurrencies
Russia’s stance on cryptocurrencies has been mixed and fluid, as demonstrated by how the “CryptoRuble” — the national stablecoin project — has been unfolding. First, the prospect of using a substitute for conventional money was deemed “illegal” by financial ombudsman Pavel Medvedev. Then, the Kremlin supposedly decided that a pet stablecoin could “minimize the amount of anonymous transactions,” or even help evade Western sanctions,
thereby greenlighting the project. However, the CryptoRuble ended up on
the back burner in the end, as the current status of the project is
unclear. It was last mentioned in the news in January 2019, when a
government official declared
that it could go live “in a 2-3 years,” although the Central Bank of
Russia (CBR) was acting “very conservatively” about the idea.
Cryptocurrencies at large are in a similar situation. In October 2017, President Vladimir Putin claimed
that cryptocurrencies “cause serious risk” and are used for crime,
citing the CBR’s decision to block websites selling digital assets. Just
a month prior to that, Russian Finance Minister Anton Siluanov argued that the authorities had to accept the idea of the digital currencies market:
“There is no sense in banning them, there is a need to regulate them.”
There
have been numerous attempts to define cryptocurrencies legally since
then. At different times, Russian lawmakers have been urged to introduce
a regulatory framework by President Putin (twice), the local Supreme Arbitration Court and the Financial Action Task Force.
In May 2018, the crypto bill — titled “On Digital Financial Assets” (DFA) — was passed by the Russian parliament but was soon sent back to the first reading stage due to the lack of definitions for key concepts, such as crypto mining, cryptocurrencies and tokens.
Last month, Prime Minister Dmitry Medvedev reportedly said
that the popularity of cryptocurrencies “has decreased,” which is why
the regulation issue “not that relevant” anymore. Notably, a year ago,
he urged the government to legislate at least some basic crypto terms.
The current deadline for the regulatory framework set by Putin expires in July.
Recap of SPIEF, an annual Russian business event for the economic sector
Binance and Huobi reported an influx of traders, Vitalik Buterin talked about Ethereum 2.0
Despite
the prime minister’s suggestion that cryptocurrencies have decreased in
popularity, they were widely discussed at the St. Petersburg
International Economic Forum (SPIEF), an annual Russian business event
for the economic sector, which took place from 6 to 8 June.
The panel dubbed “Blockchain technology and cryptocurrencies: Past, Present, Future” saw Vitalik Buterin, a co-founder of Ethereum; Chris Lee, a financial director at Huobi; Ted Lin, chief growth officer at Binance; and Kevin Shao, among others, featured in the expert pool.
Lin
and Lee reported an influx of traders of a “new generation” on their
platforms due to the recent market growth. According to them, the trend
will persist for the near future.
Buterin, in turn, talked about Ethereum 2.0, also called Serenity — a major upgrade that is supposed to make Ethereum 1,000 times more scalable in 18 to 24 months.
The Bank of Russia said that cryptocurrencies are not part of traditional financial sector
Sergey Shvetsov, first deputy governor of the CBR, reportedly compared cryptocurrencies to a “game” while peaking at the SPIEF. He is quoted as saying:
“If
we’re talking about cryptocurrencies and forex-clubs, it’s not a
financial market, it’s just a game. There are people who like to play,
they invest in it [cryptocurrency], but the ripples will affect others.
Which is why we have quite a strict policy here.”
Hence,
the CBR once again stressed its skeptical position toward
cryptocurrencies. Last month, Elvira Nabiullina, the head of the Bank of
Russia, said her agency was against the idea of crypto becoming a substitute for fiat money.
Russian official suggested creating a special economic zone that would cater to cryptocurrencies
Leonid Petukhov, the head of the Far East Investment and Export Agency, suggested
creating an offshore destination for cryptocurrencies on the Bolshoi
Ussuriysky island, which lies on the border with China. He told TASS, a Russian news media:
“We
want to make a large financial center there. Metaphorically speaking,
that would involve cryptocurrencies, cryptocurrency exchanges, timber
trading platforms — so like domestic offshore, in a good sense. What we
did in Kaliningrad.”
Petukhov was likely referring to Oktyabrsky Island in the Kaliningrad region, which, along with Russky Island in Vladivostok, became
offshore economic zones in 2018. Foreign companies registering in those
clusters are exempt from certain levies — for instance, they are free
from paying taxes on profits received by way of dividends. However,
neither of those zones currently involve any cryptocurrency-related
benefits.
Head of Russia’s largest bank said that bitcoin is for transactions, not investment — plans to stick with blockchain instead
Herman Gref, CEO of state-owned bank Sberbank, declared that he considers bitcoin a “technical instrument for transactions,” rather than a type of investment. He also referred to his own experience of investments
in crypto, revealing that he had bought bitcoin when it was worth about
$5 and used it for payment purposes instead of holding the coins.
Further,
Gref clarified that his bank will not develop any crypto-related
services but will focus on blockchain-enabled tools instead. As the CEO
put it, the crypto market’s hype has gone, but “regular work with
blockchain tech has remained,” which makes him “happy.”
Nornickel teamed up with IBM to curate blockchain academic programmes
Nornickel, the world's leading producer of nickel and palladium, signed a partnership agreement with IBM
and the Moscow Institute of Physics and Technology (MIPT) during the
forum. The alliance will establish an education center that will offer
blockchain-related programs, both for postgraduate and Ph.D. students.
“Students
and postgraduates will learn how to apply blockchain technologies, and
will gain knowledge about cryptocurrency exchanges, stablecoins,
tokenization platforms and similar services,” the parties reportedly
declared in a mutual statement.
Moreover, Nornickel’s president, Vladimir Potanin, argued that tokenization has the potential to make trading easier, cheaper and more transparent. Earlier in March, he unveiled
his company’s plans to create cryptocurrency tokens backed by
palladium. Those tokens will purportedly be used for trading palladium
through a Switzerland-based palladium fund, as well as on several other digital platforms.
Private blockchain platform for enterprises and government launched its mainnet
Blockchain-based Vostok platform’s main network was launched
at SPIEF. The mainnet will reportedly be used to validate transactions,
while Vostok’s clients — represented by large Russian corporations and
state agencies — will also have the ability to create their own nodes
and use private subnets.
As Cointelegraph reported last month,
the Russian city of Nizhny Novgorod had begun testing the use of the
Vostok-powered application “City N,” which allegedly allows residents to
file their taxes and verify their identity, among other things.
Russia’s leading oil company said a Facebook coin could be used to purchase oil in the future
Igor
Sechin, head of major Russian oil company Rosneft, reflected on a
potential relationship between oil and cryptocurrencies. Specifically,
he said that the possibility of paying for oil using digital assets in the future “should not be ruled out.”
According to Sechin, Silicon Valley tech giants like Google, Amazon and Apple are beginning to explore the oil and gas sector, which is why a Facebook stablecoin could one day be used to purchase oil by the barrel.
Further,
Sechin warned there are some obstacles that cryptocurrencies need to
overcome in order to draw the attention of energy giants. He was quoted
as saying:
“Greater flexibility often means greater
volatility, and digitalization creates risks for maintaining commercial
secrets and leads to the need to create new regulatory mechanisms,
additional reservations. Today, technology companies do not have quality
answers to these fundamental questions.”
Russian government continues to look into blockchain, but remains cold on digital assets
Meanwhile,
the Russian government continues to consider strict regulations for the
cryptocurrency industry. Most recently, a representative of Russia’s
parliament mentioned that the officials are considering imposing administrative responsibility for the mining of cryptocurrencies.
“We
believe that cryptocurrencies created on open blockchains such as
bitcoins, ethers, and others are illegitimate tools,” Anatoly Aksakov,
the chairman of the State Duma Committee on the Financial Market, told TASS.
Things are much more bullish on the blockchain front, however. This week, Russian authorities signed an agreement with Danish logistics
titan Maersk to launch TradeLens — a blockchain shipping platform —
across all of Russia to digitize paper-based transportation operations.
Earlier last month, Russian state-owned holding conglomerate Rostec proposed
an ambitious roadmap on applying blockchain in all the governmental
data systems — all of which seems to suggest that Russia’s intentions
toward the technology are getting increasingly serious.
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