I’ve been pretty vocal about how Russia has seemingly embraced the crytpocurrency craze. In announcement after announcement this year it looked like the state apparatus in Russia under President Vladimir Putin’s direction would be at the forefront of seeing the opportunities for Russia to utilize cryptocurrencies to avoid the worst of the hostility coming from the U.S.
With the draft legislation put forth by the the Russian Ministry of Finance this week those hopes look to be dashed.
The ‘Crypto-Ruble’ we discussed at great length over the summer? Nixed.
Integrating cryptocurrencies into day-to-day Russian life? Nope.
Regulation of miners and mining as taxable profits? Yes.
In short, this draft legislation is about as hostile to cryptocurrencies as it could possibly have been. And it betrays who still has out-sized control over the Russian economy and state-apparatus.
And it has been coming for a couple of years. It finally took Putin demanding they put a draft together by the end of this year to get something from them. Deputy Finance Minister Alexei Mosieev has been very hostile to Bitcoin and the legislation is a reflection of this.
And, for the life of me, I have to wonder what he’s thinking when it is obvious that Putin wanted something far more progressive than this backwards looking bill.
For all of the talk about how Putin runs Russia with an iron fist for his own enrichment, it was he who pushed for regulations and legislation to be drafted. And for the MoF to come back with this along with the Bank of Russia’s blessing is telling.
I’ve always heard that it is the Russian banking system and the politicians connected to it that are the real Fifth Column within Russia that Putin has yet to get under full control. The Bank of Russia’s adherence to IMF-style austerity in the wake of the ruble crisis in 2014 has made this clear.
Bank of Russia President Elvira Nabullina had to be privately dressed down (I suspect) by Putin himself in March before she would finally relent and begin lowering interest rates from 10% which were obviously strangling the Russian economy.
Today rates stand at 7.75% and they are still way too high, if the Russian yield curve is any indication.
It’s almost like the Bank of Russia is trying to keep the Russian economy puttering along on the edge of recession in the lead up to March’s elections.
These draft rules on cryptocurrencies were obviously put together by backwards-thinking oligarchs who owe their allegiance more to Wall St. and The Square Mile than they do Russia.
To give you an idea of how stupid these rules are. Russians would be allowed to own cryptocurrencies but they wouldn’t be allowed to use them for anything. They obviously want to protect the status of the ruble as the only settlement currency but at the same time the biggest issue in Russia is the existence of a parallel dollar-based banking system.
This has been the primary complaint of Stolypin Group Leader Sergei Glazyev who has been very vocal in his condemnation of how the Bank of Russia and the MoF have not closed loopholes to the flow of dollars through the Russian economy.