Industries all over the world are being forced to transition their business model and embrace digital transformation. Despite the fact that technology is redefining many traditional forms of commerce, the financial sector of the global economy has been hesitant to embrace a new digital exchange medium known as cryptocurrency.
Cryptocurrency is a normal currency like USD or GBP, but designed for the purpose of exchanging digital information through a process made possible by certain principles of cryptography. Cryptography is used to secure the transactions and control the creation of new coins.
Vladimir Putin has been vocal about the risks of cryptocurrencies and has called for the regulation of them, citing concerns of money laundering, tax evasion and funding for terrorism according to Bloomberg. This past Saturday, he released five presidential orders tasking the Russian government with determining how cryptocurrencies like Bitcoin, and tokens released during Initial Coin Offerings, fall into the wider Russian financial regulatory framework by next Summer.
Putin's orders also require officials to set up a process for registering miners, people who manage the computers that form the backbone of a crypto network, so the Russian government can properly tax them.
Russian Prime Minister Dmitry Medvedev, and Elvira Nabiullina, the head of the Central Bank of Russia, have been appointed by Putin to determine the best way to regulate token sales during ICO's, the same way securities are sold during Initial Public Offerings. Companies use IPO's to sell shares of its stock to raise capital. In contrast to ICO's, which are typically dependent on crowdfunding.
Mr. Putin also wants a special regulatory platform called "sandbox," proposed by the end of the year. A sandbox would allow blockchain developers, individuals that manage blockchains which facilitate secure online transactions, to demonstrate new applications or technology to the Bank of Russia for regulation. Similar legislation already exists in the U.K.
With the blockchain acting as a decentralized and distributed digital ledger used to record transactions across many computers so the record cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network, it makes sense why countries would want to be involved in the development process and impose regulations as technology changes.
Putin's final order calls for the "formation of a single payment space for the member states of the Eurasian Economic Union with the use of new financial technologies, including the technology of distributed registries" by next Spring. Russia looks to be leading the charge in the EEC for cryptocurrency adoption, as the country is supposedly working on the CryptoRuble. Kazakhstan, another EEC country, recently announced it will be creating its own national digital currency as well.
The Russian President's announcement comes during a global wave of regulatory analysis of the digital medium. Four of the largest crypto markets in the world, South Korea, China, the United States, and now Russia, have each outlined policies related to cryptocurrencies. These regulations have been proposed to help reduce crime and fraud when dealing with the crypto exchange, although Russia's motivation seems to be related to the country's plans to launch it's on version of the coinage.
Countries and financial institutions are trying to figure out the best way to implement this new currency so it can be used on a wide scale safely and securely, but it seems like it will be under the microscope and subject to strict regulation for the foreseeable future.
What are your thoughts about the future of cryptocurrency? Do you think regulation should be matched across countries regarding digital money? Let us know in the comments section below.