Russia Makes U-Turn on Cryptocurrencies After Backing From Putin

Russia Makes U-Turn on Cryptocurrencies After Backing From Putin

Foto: Fotolia

Russia is drawing up rules about how to conduct initial coin offerings, breaking ranks with China after President Vladimir Putin signaled his approval for  digital currencies, according to Bloomberg.

While China slapped a blanket ban on ICOs this month, the government in Moscow plans to regulate cryptocurrencies like securities rather than outlawing them, Finance Minister Anton Siluanov told reporters. That marks a full reversal from his ministry’s proposal last year to punish people who use digital currencies with up to seven years in jail.

Appetite for the new instruments has been growing ever since Putin met in June with the founder of the world’s second-largest cryptocurrency after bitcoin and gave his blessing for Russia to develop blockchain, the technology underlying bitcoin. A consortium of lenders including Sberbank is now seeking to use the technology to cut costs, while a presidential aide last month announced plans for an ICO.

“The state certainly understands that cryptocurrencies are a reality, there is no point in prohibiting them,” Siluanov told reporters in Moscow. “It is possible to regulate them, so the Finance Ministry will draw up a bill by the end of the year.” That reality wasn’t always apparent in Russia. Before Putin’s meeting with Vitalik Buterin, the Russian-Canadian founder of Ethereum, the legal status of cryptocurrencies was unclear.

Since then, a company co-owned by the president’s internet ombudsman, Dmitry Marinichev, has announced a plan to raise $100 million in an ICO to fund a domestic digital currency-mining operation. Herman Gref, Sberbank’s chief executive, has put the weight of Russia’s biggest bank behind a modified ethereum protocol dubbed Masterchain to make interbank money transfers safer and faster.

Not all Russian officials are believers, however. Bank of Russia Governor Elvira Nabiullina warned at the same forum that there was “gold fever” surrounding digital currencies and said that they shouldn’t be used as a surrogate for money.

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