Russia is getting ready to introduce straightforward no-nonsense laws to regulate cryptocurrency and smart contracts. However, for now, at least, the country isn’t considering launching a national digital currency. The decision came after the central bank rejected the idea of developing a state-backed Russian cryptocurrency.
The head of the Central Bank of the Russian Federation, Elvira Nabiullina, stated that a national digital currency would not be an advantageous move for the country’s economy. This is a seemingly 180-degree turnaround in just four months. Back in July, Nabiullina did not exclude the idea of creating a Russian cryptocurrency as a long-term project.
The risks of a Russian cryptocurrency
As Russia rejects a national cryptocurrency, the ‘CryptoRuble’ remains something of a myth. Over the past few years, Russian papers have written about a possible national Russian cryptocurrency, but the Central Bank doesn’t appear to be ready.
As Nabiullina stated in July, regulators were reluctant about the reliability of new technologies as a whole. They were afraid that blockchain technology wasn’t mature enough to handle something as big as its country’s fiat currency.
The authorities underlined the difference between managing private assets and a national currency, which powers most processes inside a country. The Central Bank was looking at distributed ledger technologies that could enable continuity and reliability on a large scale.
The head of the Central Bank also stated that Russians weren’t ready to quit on cash in favour of digital currency. In her latest statement, Nabiullina said that the advantages of implementing a Russian cryptocurrency did not outweigh the risks and might not justify the investment.
Russians are fond of electronic payments
In Russia, between 91-96% of the population is aware of and uses electronic payment tools at least once per year. Moreover, 78% of the population uses e-wallets for online shopping, mobile services, or utility and household services. Non-cash payment options are quickly expanding towards other areas of the economy as well.
Cash on delivery remains an option for e-commerce payments when Russians don’t trust providers or don’t want to use an online solution. However, even for those who are still fond of using cash, electronic wallets and digital payments are becoming increasingly popular.
However, authorities may still have a point when they say that Russians aren’t ready for crypto payments. While 74% of the population has heard of cryptocurrency, some studies show that as little as 2% invest in Bitcoin. So, while they may know what a digital coin is, few Russians are familiar with performing crypto-related operations.
Things could change, though. As the country’s legislators get ready to pass a new set of cryptocurrency laws, Russia could see increased adoption of digital coins among end-users. As a consequence, more people could start using more cryptocurrency to pay for goods and services.
Russia is finding many use cases for blockchain
The Central Bank may say no to a Russian cryptocurrency for now but that doesn’t mean the country will stop investing in blockchain technology. Multiple projects are being developed across the country and many of them involve some of the largest Russian organisations.
These include Russia’s National Settlement Depository (NSD), Sberbank, and Nornikel – one of the world’s largest mining and smelting companies. Furthermore, Russia is planning to bring blockchain technology to universities and even include the subject in the main university entrance exam.
Government agencies, tech giants, and large companies in Russia have all expressed their interest in blockchain technology. And they’re also investing significant resources in research and the implementation of new technologies.
Will Russia be left behind by other leading economies?
Not all nations share Russia’s conservatism when it comes to cryptocurrencies. The hesitation of the country’s Central Bank may result in Russia missing business opportunities in the long run.
Some of the world’s leading economies are ready to launch national cryptocurrencies to stay relevant in a changing global financial market.
Among the countries ready to experiment with blockchain-based digital currencies, there are China and Switzerland. Even some countries inside the European Union seem to be in favour of a digital euro that could streamline payments.
Meanwhile, the government of the Marshall Islands is currently developing its own cryptocurrency that will be recognised as legal tender and have inflation rates algorithmically built-in.
In the US, discussions over a national cryptocurrency are nothing new. Even though President Trump never misses an opportunity to position himself against cryptocurrencies, Congress is ready to start talking about whether the Federal Reserve should analyse the impact of a digital dollar.
With so much going on globally, the Kremlin may decide that a Russian cryptocurrency is worth the risk after all. As Russians experiment with new use cases of blockchain technology, we may see another change of position from the Central Bank over the coming months.