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Russia Considers Regulating Bitcoin, but Doesn’t Class it As A Currency


As Russia’s Central Bank explores the ways in which it can regulate the digital currency Bitcoin, the bank’s governor has raised questions as to whether it can be classed as a currency.

In a recent interview with CNBC, Elvira Nabiullina, governor of the Russian Central Bank, stated that she views Bitcoin as a digital asset instead of a currency.

She said:

“We don’t consider that Bitcoin can be considered as a virtual currency. It’s more digital assets with the regulation of assets.”

However, the fact that the bank is even considering the regulation of Bitcoin is a marked difference from the country’s previous stance regarding the cryptocurrency.

In March 2016, a new amendment to the Criminal Code by the Ministry of Finance in Russia saw the regulator proposing a seven-year prison sentence for management and executives of banks and financial services firms for the use of Bitcoin. For everyday individuals caught using the digital currency, the proposed prison sentence was deemed less at four years.

However, despite the proposed new draft law, the following month saw the proposal by the Finance Ministry hit a delay. At the time, the deputy finance minister Alexei Moiseev stated that a number of corrections to the proposal were the cause of the holdup.

Now, though, in a turnaround of events, the central bank’s governor has revealed that the authority is ‘analyzing’ the possibility of regulating the digital currency and is looking at the internalisation of the digital currency into the country’s regulatory systems. While Nabiullina didn’t extend further on what the central bank was doing, she did add that the authority had some concerns about Bitcoin.

“We have some doubts, we don’t see some huge benefits from introducing digital assets in our economy.”

Yet, while the Russian Central Bank is weighing the pros and cons of Bitcoin as it works on the ways it can regulate it, there are some Russian companies that are due to embrace the currency as a form of payment.

Ulmart, which is the Russian version of Amazon, revealed in May that it was going to start accepting Bitcoin alongside the fiat ruble in September 2017. It was due to accept the digital currency earlier in February; however, the e-commerce giant experienced a setback after the central bank intervened, blocking the company from accepting Bitcoin.

In the PR, Brian Kean, Chief International Officer of Ulmart, said:

“Ulmart believes such initiatives as bitcoin can be part of the efforts to develop ‘smart’ economy and cities and will aim to play a major role in this process.”

Bitcoin’s Price Surge

The price of Bitcoin has grown exponentially during the first half of 2017. In May, the price of the currency jumped to a near $2,800 for the first time, after it recorded a price of $2,799.

However, while the price bubble finally burst at the end of May, pushing the currency’s value down to $2,300 and wiping around $4 billion of its market cap value, there is still a bullish attitude within the community. So much so, that several predictions have already come out indicating a positive future for the digital currency.

Last December, a Saxo Bank analyst predicted that the price of Bitcoin could reach $2,000 by 2017, which came true on the 21 May, 2017. That same analyst, Kay Van Petersen, has now predicted that the cryptocurrency could attain even greater heights and believes that in 10 years time, each Bitcoin could be worth around $100,000.

Not bad considering that Bitcoin was trading around $750 toward the end of 2016. Van Petersen, however, is not the only way to see a bright future for the digital currency.

Aurelien Menant, CEO of regulated digital currency exchange Gatecoin, has said:

“I would not be surprised to see the Bitcoin price doubling again to around $6,000 by the end of the year.”

While, Bobby Lee, CEO of BTCC, a major digital currency exchange has tweeted in the past, stating that the cryptocurrency could reach between $5,000-$11,000 by 2020 after the block halving reward.

Additionally, CNBC Daniel Masters, director of Global Advisors Bitcoin Investment Fund (GABI) has spoken out and said that the long-term investment in Bitcoin remains strong and that it has the potential to reach $4,000 within eight to 14 months.

These are just a few of the positive indications of where Bitcoin can go, which is seeing heightened interest in the currency around the world.

Japan Legalises Bitcoin

A boost in the price and value of Bitcoin can be attributed to the fact that in April the Japanese government made changes to its regulations, which now recognises Bitcoin as a form of payment. As a result, significant trading volumes are coming from Japan.

With Japanese companies now open to accepting the digital currency as a form of payment, companies such as Peach Aviation Ltd., will make it possible for customers to pay for their flights with the currency by the end of 2017. Peach, however, is just one of thousands of industries that are already, or are due to, accept the currency in light of the new law changes.

Russia’s Next Move?

It’s not yet clear as to where Russia is going with its proposed Bitcoin regulation. In a report from Bloomberg in April, Moiseev, said that in 2018 Russia could recognise digital currencies such as Bitcoin as the authorities work on enforcing rules against money laundering.

He said:

“The state needs to know who at every moment of time stands on both sides of the financial chain. If there’s a transaction, the people who facilitate it should understand from whom they bought and to whom they were selling, just like with bank operations.”

Even though Bitcoin isn’t regulated by any government, its use by criminals has meant that it is being scrutinised by many governments who believe it’s being used for money laundering purposes, which is hard for the authorities to track.

The recent WannaCry cyberattack, which targeted thousands of computers in hundreds of countries, further highlighted its use within the criminal world. Russia was one country targeted and is reported to have been the worst hit in what has become known as the most audacious global cyberattack to have taken place.

Naturally, it is because of this incidents that countries are keen to track Bitcoin payments to stem the flow of ill-gotten gains.

Such a move to regulate the currency in Russia may also play a role in pushing its price even higher.

As of 5 June, the price of Bitcoin is trading around $2,590.

Featured image from Flickr via Joseph Pole.