Russian President Vladimir Putin has asked the Ministry of Finance and the country’s Central Bank to quickly reach an agreement on bitcoin legislation. According to the president, due to the large energy surpluses, the country has a competitive advantage in mining bitcoin.
Russia and bitcoin
The Russian government is in favor of a new legislative framework for bitcoin. Regulating the digital currency can generate tax revenue for the government. This is in contrast to the country’s central bank, which wants a complete ban on the use and mining of bitcoin.
Putin opposes this and points to the competitive advantage that Russia has in mining the digital currency, due to the many energy surpluses.
??????The Central Bank does not stand in our way when it comes to technological developments and will also make the necessary effort to stay up-to-date with the latest techniques,??????? Putin said in a meeting with members of the Russian Federation Council.
Deputy Prime Minister Dmitry Chernyshenko released a step-by-step plan for the regulation of bitcoin, among other things, last Friday. For example, the document looked at the identification of customers and the developments of lending platforms. These are websites where you can use bitcoin as collateral for a loan, or the other way around you can lend your bitcoin against interest.
Furthermore, the Ministry of Finance announced yesterday that it will grant banks permission to offer bitcoin. Both the trading and management of bitcoin for customers must be regulated, the minister said.
Prohibition seems out of the question
Although the Central Bank of Russia is in favor of a complete ban on bitcoin, mining and other cryptocurrencies, that seems an unlikely outcome. Elizaveta Danilova, head of the Financial Stability Department, says that comparing bitcoin to money is “incorrect and very dangerous”. According to Danilova, the digital currency is a development that entails risks, even if it is regulated.
Russian Finance Minister Ivan Chebeskov thinks otherwise. ‘We have to regulate, not ban’, says Chebeskov. A complete ban could lead to the growth of an unregulated black market in which the use of bitcoin will only increase. In addition, a ban is holding back Russia’s innovation in the tech industry.
President Putin agrees. He believes that the country can benefit from, for example, mining bitcoin and has therefore asked the Central Bank and the Ministry to reach an agreement quickly.
Bitcoin mining
After the ban on mining in China, countries such as Russia, Kazakhstan and the United States have become popular destinations for miners. The reason for this is the cheap energy. Due to energy surpluses in places where more energy is produced than the local consumption, the energy price is low, making it economically beneficial to mine bitcoin is a bit complicated – after all, that is an energy-intensive process.
In Russia, the regions of Irkutsk, Krasnoyarsk and Karelia in particular have large energy supply surpluses. According to sources, Putin wants to introduce restrictions that only allow mining in these places.
The Russian Chamber of Commerce is also in favor of regulating bitcoin mining. In a letter to the Ministry of Finance, the Russian Chamber of Commerce has urged it to quickly clarify the rules regarding bitcoin mining. According to the Chamber, the law and regulations are now unclear and hinder innovation in the industry.
It is not yet known when there will be more clarity about possible laws and regulations. However, according to Bloomberg, there is a good chance that the proposals will be adopted, given that President Putin supports the proposals and because of the various public statements made last week.
Bitcoin mining is an energy-intensive process, read here why and how this works exactly.
