Bitcoin Poses No Threat, say Russian Authorities

Russian Authorities: Bitcoin Poses No Threat, Won’t Be Banned


Russia’s deputy finance minister has now stated that the country’s Central Bank and the Federal Financial Monitoring Service do not see any threats in the use of cryptocurrencies like bitcoin.

More notably, the much-publicized and long-deliberated bitcoin ban by the Bank of Russia will not be pursued any longer, the bank’s deputy chairwoman Olga Skorobogatov revealed.

According to a report by Russia’s largest news agency, TASS, the Russian Federation’s Deputy Finance Minister Alexei Moiseev – who notably spearheaded the effort to ban bitcoin from 2014 – is now adopting a wait-and-see approach with the cryptocurrency.

“We will discuss this law [to ban bitcoin] in the current session of Parliament, and possibly even pass it then, or at the very latest by spring next year,” said Moiseev in September 2014. “We are currently dealing with comments from the law enforcement agencies, about the specifics of legal measures, and we will take their remarks into account. But the overall concept of the law is set in stone.”

Having consulted with those experts over the past two years, amid considerable opposition by other Russian governmental authorities against the Finance Ministry’s proposed bitcoin ban bill, Moiseev has now told reporters that bitcoin poses no threat. This, despite comments by Russia’s Investigative Committee chairman Alexander Bastrykin who claimed that bitcoin posed “ a real threat to the financial stability of Russia”, in 2016.

In statements reported by TASS, the deputy finance minister stated:

"So far, we decided just to watch carefully how it is developing. We decided that teh Central Bank and the Federal Financial Monitoring Service should monitor cryptocurrency for Russia’s economic security. So far, these agencies believe that there is nothing critical [as a threat] in it. That means that they [the threats] may appear in the future, but now they do not exist."

The comments represent a remarkable turnaround for an official who vehemently pushed for the approval of the bitcoin ban bill through the Russian house of Parliament. One draft of the ban infamously proposed a 7-year prison term for bitcoin use in Russia, less than a year ago. Ban No More

In statements echoing those made by the Minister of Finance, deputy chairwoman of the Bank of Russia Olga Skorobogatova has separately stated that the central bank will not be taking prohibitive measures with the use of bitcoin.

In statements reported by regional publication CryptoRussia, the central bank official stated:

"With Bitcoin – a private currency, it became clear that [regulation] was not simple. Regulators and authorities agree that they would not like to specifically prohibit [Bitcoin]. [We] would instead like to understand it and on this basis build a regulatory framework."

The telling statements come within months of Moiseev stating that the ban proposal was on hold. While bitcoin could possibly see regulation in Russia, the adoption, mining or use of the cryptocurrency will no longer be considered a criminal offence.

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Bitcoin at parity with Gold

Bitcoin at parity with Gold

Yesterday evening at 1700 GMT the value of bitcoin surpassed the value of gold, this is the first time any currency has reached that level, could this mean raise the possibility of a change to a new standard.

Below is an extract from wikipedia

 Gold standard and Bitcoin

Bitcoin in grams of goldAccording to research produced by the Bank of Canada, the emerging Bitcoin economy has many similarities with the economy based on gold standard, in particular:[86][87]

  • limited and predictable supply of the anchor of the monetary system

  • no central bank or monetary authority controls the supply

  • low or non-existent inflation

  • virtually no arbitrage costs for international transactions

  • Governments have less control over their domestic economies

  • Governments lose seigniorage revenues that they obtain from the ability to almost costlessly create money

Edward Hadas and Michael Hiltzik noted that monetary systems based on Bitcoin and gold have some similar disadvantages:

  • independence from government[88][89]

  •  price declines[88]

  •  less spending during crisis times[88]

 George Gilder, a proponent of gold standard, proposed breaking "the government monopoly on money" by using a combination of Bitcoin for the internet and treating gold in tax terms as currency.[90][91]

How Will Governments React ?

Bitcoin and other cryptocurrencies are a thorn in the side for conventional Fiat currency which have all abandoned the gold standard of the past when they started to print money as and when they needed. In time of Crisis many people move investments into gold as a safe haven, however holding gold presents a problem its heavy and incurs storage costs and not convenient for day to day shopping. In early times it was not unusual to chip bits off a coin to make payments.

cryptocurrencies can be used both for shopping and person to person transactions protected by blockchain’s. They can easily be moved across borders, even though some countries and the EU are looking at ways of restricting this. It is only when you exchange fiat currencies to and from cryptocurrency that governments may be able to glean information from exchanges. It might make sense for forward looking governments to accept cryptocurrency payments/

Banking is already starting to suffer because the cost of moving money from one country to another via cryptocurrency is minimal compared to fees charged by banks. Also ordinary people are now moving savings into cryptocurrencies which are building a history of yearly growth higher than saving rates.

The use of bitcoin as forex instrument has been explored by banks in the past. A notable example is that of Shinhan Bank, a major South Korean financial institution that began a remittance service in the Korea – China corridor, with bitcoin. Faster, near-instant settlements at significantly lower costs are some of the straightforward benefits of using bitcoin in remittance.


David Ogden

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