Crypto – Outlaw No. 3 – Russian Roulette

Russia’s excuses are exactly the same as China’s

• Russia is considering following China (see here) and India (see here) down the road of banning cryptocurrencies using the excuse of sound investments and crime but, as is becoming commonplace, this is really about protecting the state’s control of money.
• Elvira Nabiullina is the governor of the Russian central bank, a long-standing cryptocurrency sceptic, and the source of a proposal to outlaw all cryptocurrency operations.
• Russia’s plans are a bit different from those of China and India where Russian citizens will still be allowed to invest in cryptocurrencies overseas but these transactions will be monitored.
• Ms Nabiullina cites “financial pyramids”, “bubbles” and “money laundering and illegal operations” as the reasons for considering the ban but I suspect that the reality is quite different.
• Cryptocurrencies run on the blockchain which is a decentralised ledger-keeping system that no one controls.
• Hence, if Bitcoin and other cryptocurrencies become a widely accepted medium of monetary exchange, then governments and central banks will lose control of the money used within their domains.
• Hence, any cryptocurrency is deeply threatening to centralised control which is why a banning is likely to happen, it is just a question of when.
• Furthermore, a ban will remove all competition for a digital Rouble which I suspect will be launched to fill the vacuum created by a ban.
• This will be completely under the control of the Russian central bank and will provide the central government with complete transparency on all transactions that use this currency.
• It will be able to tell where each Rouble has gone and where it came from making money laundering and other criminal enterprises very difficult.
• A digital Rouble will also provide the government with the ability to cancel any Roubles held by any person or entity that it does not approve of.
• This is the equivalent of having RUB10m in banknotes in one’s safe where the central bank knows the serial numbers and can set fire to them remotely should it so desire.
• This is why I think that the digital Rouble, like the Yuan and Rupee, will go nowhere outside of their home countries and will be shunned at home outside of those who are compelled to use it.
• I continue to think that these three countries are passing up on a great opportunity as bitcoin miners and entrepreneurs have become nomads hopping from one country to another as they get banned in more and more locales.
• Instead of banning cryptocurrencies, these countries should be embracing them and welcoming all of the entrepreneurs and innovators who could have been an important part of increasing their standing on the world stage of technology.
• This attitude means that these entrepreneurs and innovations will go elsewhere meaning that Russia, India, and China, all become also-rans in financial innovation.
• This, along with automotive, is the next big sector to be disrupted by digitisation and outlawing it will mean slower economic development and ultimately lower tax revenues for these countries.
• This is a self-defeating exercise in the long term and some forward-thinking country is likely to give these technology refugees a home that will benefit both parties greatly.
• China, India and Russia will be the long-run losers.