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The role of gold-backed cryptocurrency in Russia

Elena Davies

Many sceptics believe the problem with cryptocurrencies is that they are not secure and are just lines of computer code. Gold-backed cryptocurrency is backed (unsurprisingly) by gold; a tangible asset meant to increase the credibility and security of the digital currency. As a form of stablecoin, gold-backed cryptocurrencies have their value tied to gold, instead of a currency like the USD or rubles. Each coin represents a unit of gold (one coin=one gram of gold, for example), which is stored by a third party. The main advantage lies in reducing the cryptocurrency’s volatility since the price of the coin can’t be lower than the current gold rate. Gold in Russia The Russian government intends to return to the gold standard and

The post The role of gold-backed cryptocurrency in Russia appeared first on Coin Rivet.

Many sceptics believe the problem with cryptocurrencies is that they are not secure and are just lines of computer code.

Gold-backed cryptocurrency is backed (unsurprisingly) by gold; a tangible asset meant to increase the credibility and security of the digital currency.

As a form of stablecoin, gold-backed cryptocurrencies have their value tied to gold, instead of a currency like the USD or rubles. Each coin represents a unit of gold (one coin=one gram of gold, for example), which is stored by a third party.

The main advantage lies in reducing the cryptocurrency’s volatility since the price of the coin can’t be lower than the current gold rate.

Gold in Russia

The Russian government intends to return to the gold standard and is thinking about using cryptocurrency as a tool to reduce dependence on the US dollar.

Russia wants to return gold to the world market as it believes this will be the strongest blow to the US dollar.

Since the USA brought the world out of the gold standard, the world economy has been using dollars instead. This was fine so long as the dollar was backed by gold, but now it is not backed by anything, which makes it just paper.

Therefore, if Russia continues to rapidly increase its gold reserves and put gold-backed cryptocurrency into operation for international settlements, dependence on the US dollar will be reduced.

Last year, Russia became the largest buyer of gold, and over the past 10 years, the country has increased its total volume of gold reserves by 400%.

The Central Bank of Russia

The Central Bank of Russia is studying a proposal to create a cryptocurrency linked to the price of gold, which could be used for cross-border settlements with other countries.

The head of the Central Bank of Russia, Elvira Nabiullina, said: “As for mutual settlements, we will consider, of course, a proposal on a cryptocurrency that is tied to gold. But, in my opinion, it is more important to develop settlements in national currencies.”

Nabiullina also reminded people that the position of the Bank of Russia on the launch of cryptocurrency in the Russian monetary system has not changed.

“We, in principle, are opposed to cryptocurrencies being launched into our monetary system. We do not see the possibility that cryptocurrencies, in fact, fulfill the function of monetary surrogates,” she said.

Russia is a member of the Eurasian Economic Union, along with Armenia, Belarus, Kazakhstan, and Kyrgyzstan. The EAEU Minister for Integration and Macroeconomics, Tatyana Valovaya, more positively assessed the idea of ​​using cryptocurrency for cross-border settlements, at least between the EAEU member states.

She said: “We have prepared an analytical report and will soon present it which will analyse what cryptocurrency is, what is happening in the world, what approaches different countries have, and what regulation is envisaged. And, if the phenomenon of cryptocurrency in any perspective may cause risks to our macroeconomic stability, we need to understand that.”

The Central Bank of Russia has accumulated large amounts of gold in its reserves, buying it from Russian gold miners. This contributes to the development of precious metal mining in the country, as companies can guarantee the sale of their products.

With the help of this yellow precious metal, the financial authorities of Russia intend to reduce the dependence of Russian reserves on the US dollar. In this regard, for a long time there was speculation about the possibility that Russia is developing a currency based on gold.

GoldMint 

One company in Russia has already launched a cryptocurrency with its price tied to the value of gold. A group of entrepreneurs from Russia launched the blockchain platform GoldMint with the gold-backed token MNTP. The cost of the MNTP token will always be equal to the price of an ounce of gold on the London Bullion Market and is backed with physical gold stored in automated vaults at partner banks of the project.

“Secured cryptocurrency is the next step in the direction of the spread of blockchain technologies. Bitcoin and other early cryptocurrencies essentially ceased to be money and turned into ‘Apple stocks’, which are growing all the time because everyone wants them. Our cryptocurrency is not growing faster than gold, and this is its plus,” commented Dmitry Plushchevsky, co-founder of the project.

You can buy MNTP tokens on several cryptocurrency exchanges in countries where the issue and circulation of cryptocurrencies is allowed. All operations are carried out through smart contracts based on the Ethereum platform. Third-party companies will be able to use the API to integrate their services with GoldMint.

Russia and China

There have also been rumours that Russia and China may create their own joint cryptocurrency secured by the gold reserves of the countries.

The large purchases of gold by Russia and China last year may be the first step towards the launch of a joint cryptocurrency. The volume of gold being purchased began to grow sharply after the introduction of Western sanctions.

A joint cryptocurrency between China and the Russian Federation will differ from existing cryptocurrencies and would most likely act as a settlement method for international bank transfers between legal entities.

Disadvantages of gold

Despite the relative price stability, gold has several disadvantages. It is expensive to transport, transfer, and store in proper conditions. In this regard, cryptocurrency is much more convenient. Currencies built on blockchain technology can only be safe when based on a large number of nodes around the world. With full centralisation, they are just as vulnerable as any other computer system.

The Russian view

Russian government economist Vladislav Ginko expressed doubts that the country could create a cryptocurrency linked to gold. The economist noted: “Gold is being traded for US dollars, and the ability to sell it can also be limited by sanctions from the United States. This can be seen in the example of Venezuela, which cannot sell its reserves locked in the Bank of England.”

What cryptocurrencies are backed by gold?

If you just want to buy gold with Bitcoin, the easiest and most reliable way is to open an account with Vaultoro. This is a gold service that allows you to buy and sell gold with Bitcoin and other altcoins. Gold is 100% your legal property and is fully insured in Swiss vaults. Vaultoro is perfect if you prefer to park your crypto profits in gold rather than fiat currency.

This is the current list of cryptocurrencies backed by gold:

  • Econ – Econ is a stable currency developed by Eidoo that is 100% secured with physical gold. Each Econ token corresponds to 1 gram of gold. Econ is an ERC-20 token, and you can collect them in an Eidoo wallet.
  • Gold Currency – The Golden Currency plans to become the first global private currency on the blockchain that is 100% secured by gold.
  • GoldVein – GoldVein is a blockchain platform for investment in gold mining. The cost of GoldVein tokens increases with the amount of gold mined.
  • AgAu – AgAu is a completely decentralised cryptocurrency with 100% gold backing.

Conclusion

The virtual gold rush is gaining momentum in the crypto world now, and even countries are looking for opportunities to issue their gold in cryptocurrency.

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