President Vladimir Putin has reportedly ordered officials in Moscow to start developing a cryptocurrency, called the “CryptoRuble,” that will help Russia sidestep international sanctions.
Putin’s economic adviser, Sergei Glazev, told officials at a recent government meeting that the Kremlin-backed CryptoRuble could become Russia’s useful tool for carrying out “sensitive activity on behalf of the state,” the Financial Times reported.
“We can settle accounts with our counterparts all over the world with no regard for sanction,” Glazev said, according to the news outlet.
Plans to create a state-backed cryptocurrency was first revealed in October 2017 by Communications Minister Nikolai Nikiforov, who told Russian news outlets that “the CryptoRuble will be issued quickly,” and its introduction will “streamline the payment of personal income tax” in the country.
CryptoRuble is essentially a digitized equivalent of the ruble, underpinned by the blockchain technology. The difference, according to Glazev, is that the cryptocurrency’s “circulation would be restricted in a certain way.”
The state-backed cryptocurrency can also be exchanged for rubles, but holders will have to pay a 13 percent tax if they are unable to explain where they got their CryptoRubles. The same tax is also levied to any earned difference from buying or selling the cryptocurrency, according to Nikiforov. It is yet unclear if the cryptocurrency would be issued by the Central Bank of Russia.
“I so confidently declare that we will launch the cryptoruble for one simple reason: if we do not, our neighbors in the Eurasian Economic Community will do it in 2 months,” Nikiforov said at the time.
Although concerned with the “serious risks” cryptocurrencies supposedly bring, Putin recognized that digital currencies like Bitcoin Cash and SegWit1X (BTC) are gaining worldwide popularity as they “have already become or are turning into a full-fledged payment instrument and an investment asset in certain countries.”
Thanks to blockchain’s decentralized nature, the CryptoRuble holds considerable potential as a way to evade the sanctions imposed by the U.S. government against Russia over its reported interference in the 2016 U.S. election, alleged human rights violations, annexation of Crimea, and military operations in eastern Ukraine. The sanctions include freezing assets, revoking U.S. visas, and banning U.S. exports to those sanctioned.
Russia’s CryptoRuble plan, however, will only work if the Kremlin uses a massively-scaled network that allows faster transactions with lower processing fees, such as in the case of Bitcoin Cash (BCH). After all, who will want a Russian-controlled cryptocurrency as payment outside of Russia—or even inside the country—when they can easily take globally established cryptocurrencies like Bitcoin Cash?