Moscow ponders creating “cryptorouble” to avoid sanctions
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Russian President Vladimir Putin has commissioned work to develop a framework for establishing an official cryptocurrency, a Kremlin official has said.
Cryptocurrency transactions are completed using cryptographic techniques, then added to a secure, distributed ledger – a blockchain – meaning that almost all cryptocurrencies are free from the influence of governments or other central authorities.
Despite the importance of decentralisation to cryptocurrencies, the Russian government is not the first to consider creating a state cryptocurrency. The government of Dubai has launched its own cryptocurrency, emCash, the central bank of Sweden is assessing the possibility of introducing an e-Krona, and Nicolas Maduro, the President of Venezuela, has suggested creating a state cryptocurrency in an attempt to evade further economic meltdown.
Since the annexation of Crimea by Russia in 2014, many countries have introduced rounds of sanctions on Russia, targeting its defence, energy and financial sectors and preventing Russian organisations using some Western currencies to carry out transactions. These financial sanctions played a major part in the subsequent collapse of the rouble.
At a Kremlin meeting, Sergei Glazev, government economic advisor, commented that it could be possible to evade these sanctions by introducing a Russian cryptocurrency, a “cryptorouble”.
The cryptorouble’s circulation would be restricted and monitored by the state.
“This instrument [the cryptorouble] suits us very well for sensitive activity on behalf of the state,” said Glazev, according to the Financial Times. “We can settle accounts with our counterparties all over the world with no regard for sanctions.”
Interest in cryptocurrencies exploded in 2017, with Bitcoin – the first decentralised digital currency – rising in value by nearly 2,000 per cent during a volatile year. This led to trading frenzies, warnings of a possible collapse and discussions about how cryptocurrencies may be regulated around the world.
President Putin has expressed suspicion regarding cryptocurrencies in the past, which he has described as risky and associated with criminality due to the level of anonymity that they allow. However, after a meeting with Ethereum founder Vitalik Buterin in June 2017, the Kremlin stated that the men had discussed the possibility of building cryptocurrency-based ties with partners in Russia.
In September 2017, Anton Siluanov, the Russian finance minister, stated that the use of cryptocurrencies was already an unavoidable “reality” and would be regulated in future. The Russian government has since begun to lay out a framework to regulate cryptocurrencies, which will govern their status, cryptocurrency mining, and how initial coin offerings may be conducted.