Experts: Russia’s Cryptorouble “May Not Be for Public Use”
Russia’s financial powers-that-be are deadly serious about issuing a national digital currency, and may even come good with their promises within the year, per experts. But what will this ambitious new coin look like, and what problems will it have to overcome?
When Bank of Russia chairwoman Olga Skorobogatova announced last summer that the country was thinking of developing the cryptorouble, her words were met with no shortage of skepticism. But when Russia’s influential Central Bank chief, Elvira Nabiullina, later confirmed that the cryptorouble was no mere idea, but a firm, government-backed plan, the world sat up and paid attention.
Indeed, Russian President Vladimir Putin’s financial adviser Sergei Glazyev has even suggested the cryptorouble had been given an executive blessing by the president himself, hoping it will help the country sidestep the crippling effects of international sanctions. Glazyev said, “This instrument suits us very well for sensitive activity on behalf of the state. We can settle accounts with our counterparts all over the world, with no regard for sanctions.”
Per news agency Rosbalt, however, expert opinion in Russia is now divided on how exactly the cryptorouble will come into being, how it will be used, what platform it should use and what sort of obstacles it will have to overcome in order to become successful.
Some have suggested that the cryptorouble will act as a sort of go-between currency, creating a de facto bridge between traditional currencies and cryptocurrencies like bitcoin and ethereum. Doing this would allow the police and tax authorities the power they have long been calling from – the ability to stay abreast of the entire country’s crypto dealings.
Rosbalt quotes Russian bitcoin consultant Denis Smirnov as saying, “With a model like this, if you had bitcoin holdings, for instance, you would first have to transfer these to cryptoroubles before you could exchange your funds for paper roubles.”
Not everyone shares the view that the government wants to put the cryptorouble into general circulation. Instead, others believe that Russia’s proposed digital currency will not be made available to the general public at all, but instead be used to process transactions quickly within the Eurasian Economic Union (EAEU) – the CIS countries that maintain close political ties with Russia.
A member of the council for digital economy under the Duma, Nikita Kulikov, explained that should the Kremlin decide to take this approach, it could be of help in not only financial transactions, but also inter-regional blockchain-related developments. Kulikov says, per Rosbalt, “I see the cryptorouble only being applied at the inter-state or inter-bank level. It could well be used to increase the speed of financial transactions within the EAEU, or to help introduce smart contracts.”
Kulikov also notes that this approach would explain why Putin and his cabinet have been so keen to talk blockchain and crypto with their counterparts in the CIS of late. In late December last year, Putin called on Kazakh President Nursultan Nazarbayev to take part in a joint Russo-Kazakh tech forum that the former said would help “develop the digital economies of both countries.”
Russian Prime Minister Dmitry Medvedev has been even more active in this respect, travelling to Kazakhstan to meet CIS prime ministers for talks on information-sharing, crypto ventures and all things blockchain-related.
Kulikov says, “The cryptorouble project is not so much about developing a national cryptocurrency as much as it is about developing a universal means of interstate payments within the EAEU. This is what Mr. Medvedev is talking about in Kazakhstan.”
Although the cryptorouble is still yet to materialize, it has already been referred to as a “digital financial asset” and as a “proposed legal means of payment in Russia” in a draft law put before the lower house of parliament on January 25.
The bill was authored – intriguingly – by Communist Party MP Rizvan Kurbanov. In the bill, Kurbanov refers to “a digital financial asset (or cryptocurrency), which is circulated in Russia, protected by cryptographic methods and used by participants in a distributed register of digital transactions.”
Experts, meanwhile, believe that Nabiullina and the Central Bank will be spoilt for choice when it comes to selecting a platform to operate on. The Ethereum platform, co-developed by Russian-born Vitalik Buterin is one viable option. Putin last year met with Buterin, and the country’s banks have been keen to develop a range of Etherium-related projects in recent months. Another option is the much talked-about Master Chain project, which is also being developed by the Central Bank in conjunction with leading Russian financial companies.
One potential spanner in the cryptorouble works could be posed by developments in neighboring Belarus. Minsk has threatened to disrupt the regional balance of blockchain and crypto power with its new High-tech Park scheme. Under the terms of the project, backed by President Alexander Lukashenko, the park will grant tax exemption and visa waivers to all blockchain, smart contract and cryptocurrency projects wishing to relocate to Minsk. The country will also legalize cryptocurrencies, smart contracts and initial coin offerings (ICOs).
Some warn that having Belarus on the doorstep might prove a difficult obstacle to overcome. Indeed, the High-tech Park may well prove fatal for Russia’s hopes of becoming the CIS’ crypto top dog – regardless of what comes to pass with Moscow’s cryptorouble project. The temptation “to run off to Minsk and cash in,” as Smirnov puts it, may be too much for many of the region’s crypto and blockchain pioneers.
Smirnov says, “Given that Russian legislation is much tougher than that of its neighbor, crypto companies that might otherwise have taken up residency in Russia might end up turning to Minsk.”