It is understood that Vladimir Putin himself has ordered teams of experts to create a cryptocurrency that will allow the Russian leader to bypass international sanctions and keep many of his country’s huge intercontinental transactions under the radar.
Cryptocurrencies are starting to play an increasing role in modern financial markets. A few years ago, crypto was being viewed as some form of pyramid scheme by many in Russia. However, it is already obvious that they are becoming part of our everyday economic reality.
The CryptoRuble digital currency
The Russian government has long been undecided on how to deal with Bitcoin and other virtual coins, but it seems that it has finally agreed on a clear position regarding the CryptoRuble.
The regulatory framework is already being prepared, so what prospects can ordinary investors expect from such a project?
The state will declare stricter regulation as a means of protecting ordinary citizens who may unknowingly end up suffering from fraud. The issues of emission and control will be handled by the Central Bank, perhaps in a coalition with the Ministry of Finance.
However, the CryptoRuble will not have anything in common with the technologies of world-famous cryptocurrencies like Bitcoin, Ethereum, and others. This has been clearly expressed by Russian financial analysts.
The Russian government itself is interested in the project as another means to strengthen control and avoid external sanctions. Therefore, it is expected that government agencies will be the first to trial the CryptoRuble. In the future, the regulator may try to introduce the asset into mutual settlements between legal entities and even individuals.
Nevertheless, there are fears that if the digital ruble simply just reflects the same dynamics as its paper counterpart, it will not arouse interest from ordinary citizens and even foreign exchange market players.
What makes the CryptoRuble unique? The differences and similarities with other cryptocurrencies
Russia’s proposed CryptoRuble doesn’t follow the principles of most common global digital currencies. Unlike standard cryptocurrencies, the CryptoRuble will clearly differ in its characteristics.
First of all, it will be fully controlled by the state bodies of the Russian Federation. Investors cannot count on the anonymity of transactions. As stated by Putin and other high-ranking officials in the country, this is done in order to prevent the laundering of funds earned by dishonest means.
The CryptoRuble should not be treated as a monetary unit that will abide by the laws of supply and demand. It is not clear how the project will be of interest to society from a practical point of view. If each CryptoRuble is equal to the same ordinary (fiat) ruble, then it will simply be another means of payment and no more. There is also the risk that it will become vulnerable to inflation.
CryptoRuble or digital token?
According to the head of the Russian Ministry of Communications, Nikolay Nikiforov, it is incorrect to use the terms “CryptoRuble” and “cryptocurrency” when referring to the proposed digital asset.
Instead, as the asset will be used as a digital calculation tool, the definition of “digital token” is more accurate.
Mr Nikiforov said: “The term ‘CryptoRuble’ is incorrect from the point of view of banking terminology and legislation. It would be more correct to say digital token.”
Mr Nikiforov has urged the government to introduce a separate specific concept and to work out all the rights and obligations in the development stage.
However, the development of this digital asset requires certain prerequisites and conditions.
Cryptocurrencies and digital assets need to abide by certain laws and regulations, but Russia’s laws surrounding digital assets are still relatively unclear.
Vladimir Putin commissioned a team to create special amendments to the domestic legislation which would explain the concept and existence of cryptocurrencies.
The Central Bank was also required to prescribe a procedure according to which they could be used and regulated.
Despite Russia’s previous refusal to be drawn in by such financial instruments, the Russian authorities seem to have realised the need to work with them given the realities of the modern financial market.
The CryptoRuble will not be mined in the traditional sense, and supply will be controlled by the government. However, investors will feel more secure because the currency’s success will be tied to the Russian economy and not purely speculative or prone to volatility.
It will have little in common with the virtual currencies that are already circulating in the market. Only time will tell whether it will be accepted by the Russian population.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.