The Russian government recently drafted a bill that will allow firms to test cryptocurrencies without being in violation of the country’s laws. The bill also allows for the development of neuro and quantum technologies, artificial intelligence, robotics, cybernetic and amplified reality, and blockchain. Four regions in the country will be allowed to safely test the innovations and will become know as regulatory sandboxes – spaces where untested technology can be implemented.
The new bill follows a shift in how Russia is considering digital currencies. “For many years cryptocurrencies are actively circulating around the world, but in fact most countries, including Russia, do not regulate their use,” noted Russian Advisor Kirill Kabanov. “Regulatory sandboxes will be effective if they are used as test grounds for norms that can later be applied to adapt the legal environment to the new technological structure.” Russia’s capital, Moscow, and the other three regions (Perm Krai, Kaluga Oblast and Kaliningrad Oblast) have been chosen to be the regulatory sandboxes.
President Putin wants the regulation framework in place by June 1. He made the announcement this year during the spring parliamentary session. This follows on from a previous vote last year that looked at regulating digital currencies. The vote was postponed several times. This time it looks like Russia will pass the bill and begin to integrate cryptocurrencies into the economy.
This marks a huge turnaround from just a few years ago. When cryptocurrency was becoming a global phenomenon, Russia was one of countries that pushed back against digital currencies. In 2014, the Central Bank of the Russian Federation went as far as to ban Bitcoin. Eventually, the administration realized that they could not completely prohibit the usage of cryptocurrencies and in 2017, Vladimir Putin instructed the government to work with the Central Bank to determine their legal status. This has led to the regulatory sandboxes that were created this year.
One company that will benefit from the new regulations is Russian social media giant VKontakte (VK). Investing Blockchain reports that they are in the process of creating their own cryptocurrency in reaction to rumors about Facebook working on a digital currency. VK has a monthly active user base of 97 million, and when the new crypto is launched this will introduce many more Russians to cryptocurrency, further pushing the demand for digital currencies in the country.
The number of cryptocurrency users in the world continues to rise. This is despite the fact that the hype around digital currencies is not as strong as it was two years ago. New altcoins are still being created, and the user base for this market remains large. FXCM relays that there are at least 35 million identity-verified cryptocurrency users (people who choose not to be anonymous when doing crypto transactions) as of December 2018. With Russia looking to regulate digital currencies, this number will likely increase by a large amount.
Russia’s move to legislate cryptocurrencies continues the global trend that is seeing their widespread adoption. This is together with the increasing use of blockchain technology. To stay competitive, most business transactions nowadays involve the transfer of digital data, all made easier with the utilization of blockchain. In a previous post on CryptoConsulting we talked about the advantages blockchain can offer businesses including the decentralization of assets, fast processing, immutability, time-saving, cost-saving and limited risk factors. Ironically, it is the benefits of blockchain and cryptocurrency that make them both so difficult to regulate.
If the bill gets passed, Russia will see a wider adoption of cryptocurrency in the country. Whatever Russia decides to do with digital currencies will affect the global community in the long run. As the world looks to find ways to further integrate and regulate cryptocurrencies, Russia has now also thrown its hat into the ring. The question is, which country will successfully find a way to regulate cryptocurrency first?