In recent years, Russia has been rapidly researching and developing cryptocurrency and blockchain technology. Russia was generally at a standstill regarding legislation on bitcoin and virtual currencies, so why are we only seeing movement now? This article will shed some light on the current situation.
President Putin’s Remarks
At the G20 Summit in Hamburg on July 7th and 8th, Russian President Vladimir Putin stated, “The G20 will lead efforts to establish an international regulatory framework in the virtual technology field, which will develop the international financial system and the entire international economy will benefit.”
His remarks reveal that world leaders are placing importance on virtual technology in the future of the international economy.
Additionally, at the St. Petersburg International Economic Forum 2017 (June 1st – 3rd, 2017), it was revealed that Ethereum developer Vitalyk Butlerin and Putin were in contact when the former was looking for business partners in Russia. These events, paired with Putin’s remarks shows the Russian government is paying increased attention to cryptographic currency and blockchain technology.
What is the Russia’s aim?
President Putin’s movements show Russia is interested in the rapidly expanding cryptocurrency and blockchain markets. Since these are innovative technologies, there are no existing legal frameworks. It therefore becomes very difficult to handle regulation, because they are inherently non-centralized.
For example, it is difficult to impose income tax on bitcoin denominations since they have never been stipulated by the legal system in the past, and furthermore it is difficult to grasp the the worth of bitcoin received. Decentralization/non-centralization is a central philosophy of public cryptocurrency, including bitcoins. Therefore, there are many parts that are fundamentally incompatible with national regulation.
Putin is aiming for an international regulatory framework for cryptocurrency. Although at first glance it seems counterintuitive for the government to actively non-centralization, thereby increasing fields that are beyond the control of the state, it can also be said that the aim is to put Russia in a strong position, as they will have decided the standards on international regulations.
It is therefore vital to prompt a smooth transition between conventional technology and new virtual technologies. Especially in the case of cryptocurrency, settlement and assets are involved – if mistakes are made, issues of privacy may arise. It is a problem that must be dealt with delicately. This may be why the Russian government is contacting the developer side, such as the abovementioned Mr. Vitalik Butlerin.
Russian efforts on cryptocurrencies are not palpably progressing despite legal frameworks for bitcoins and virtual currencies have already been developed in many countries such as Japan, China, South Korea, and the United States. In Russia, the legal positioning of virtual currencies is not clear. While worldwide cryptocurrency and blockchain technology are garnering more attention, it seems that the desire to establish international regulatory framework will be grow concurrently with legal development in each country.