As of February 8th, 2022, Russia officially recognized Bitcoin as a currency, but that recognition comes with heavy-handed restrictions that make trading in Bitcoin and other cryptocurrencies much harder for the average citizen.
Cryptocurrency exchanges will need to have at least 100 million rubles (USD 1.1 million) in assets, and traders will need 50 million rubles (USD 500,000) to be approved for trading in Bitcoin.
Russian citizens will only be able to buy Bitcoin on these platforms using approved accounts set up through Russian bank accounts. Exchanges then need to send all transaction information to the Russian anti-money laundering agency and tax agencies so that large transactions can be taxed.
So overall, if you’re wealthy, you can trade in Bitcoin officially. This comes with a price in Russia, since the government will verify all transaction to make sure it fits in legally with their requirements.
Widespread Cryptocurrency Adoption
Countries are taking various approaches to cryptocurrency. Some are looking at it as a viable and worthwhile alternate currency to be used the same as cash in stores, paying taxes, and sending money to friends and family.
Some countries recognize that cryptocurrencies aren’t going away, so instead of banning them and making underground markets, they want to regulate and tax cryptos. In addition, many governments are looking to implement their own digital currencies as alternatives for people that don’t care which digital currency they use but yearn for digital assets.
Countries Looking For True Adoption
El Salvador was the first country to fully adopt and legalize Bitcoin as an official currency back in September 2021. As a result, every retailer or business that accepts payments must now accept Bitcoin as a payment method, the same as if they were accepting cash.
One of the big draws for El Salvador is that around ⅕ of their GDP comes from families abroad sending money back to the country. That fact presents two issues, the first being that there are high fees attached from banks. Secondly, around 70% of people receiving this money don’t have bank accounts, so they are forced to use even higher transaction services. El Salvador leaves a lot of money on the table with fees that could make it into the country for use through Bitcoin, where the fees are a lot more reasonable and standardized.
Many other countries are seeing that Bitcoin could bolster their economies by allowing its use as a standard currency. One example is Panama, who see Bitcoin as a great option and are underway with making it legal currency.
Countries Looking For Digital Currency Adoption
Countries like Russia and many others are looking to adopt Bitcoin and other larger cryptocurrencies in a way that allows them to be regulated, taxed, and limited to only those with enough fiat currency and other assets to show that it’s simply an investment rather than an alternative.
Cryptocurrencies like Bitcoin were originally designed to be an alternative to fiat currencies, removing regulation, tracking, limitations, and overall control. However, as cryptos have become more popular and the industry’s market grew, it’s a problem that governments are looking to address.
By adopting cryptos, most governments are looking to regulate, tax, and control access to them. They are also looking to implement alternative, fully-controlled governmental digital currencies that will see wider adoption for people that only want an easy digital payment method.
However, it’s most likely that government-issued digital currencies won’t be volatile or see high trading values and will be simply used as digital currencies.
With Russia putting a tight grip around digital currencies, it’s likely that other countries will start to implement similar strategies. As a result, investors currently seeing high payouts with Bitcoin, NFTs, and other crypto methods could see fewer gains as it becomes more taxed and regulated.
Government To Government Uses
Recently, Russia has been involved in conflicts with Ukraine. As a result, many countries have implemented sanctions against Russia and removed its ability to make and take financial transactions through various methods.
With Russia’s recent interest in regulating and adopting Bitcoin or other digital currencies, some wonder whether Bitcoin can be used to bypass these sanctions and allow Russia and other countries to continue operating worldwide, with transactions flowing through Bitcoin.
While regular citizens are taxed or could face problems in their country by illegally trading Bitcoin, countries like Russia that already have sanctions in place face no further penalties by transacting directly with entities through Bitcoin. Countries like Iran, North Korea, and Cuba are already using digital currencies to bypass sanctions and continue operating with other countries or entities willing to accept digital currency as payment.
The adoption, regulation, and integration of cryptocurrencies make it much easier to bypass worldwide sanctions with governments and to ease restrictions on wealthy business owners within those countries, making the sanctions less effective.
How Does Russia Adopting Bitcoin Impact Cryptocurrency?
Russia holds an estimated 12% of the world’s Bitcoin and large percentages of other cryptocurrencies. It provides a blueprint for other governments on how to decrease the benefits to regular citizens of using a cryptocurrency and collecting more taxes rather than driving underground markets.
It appears that the adoption of digital currencies is inevitable, but major countries like Russia, China, and others are looking to create and push government-backed digital currencies rather than allowing decentralized cryptocurrencies like Bitcoin from becoming fiats replacement. These countries are removing the inherent purpose of these cryptocurrencies by trying to push it into being an investment option only.
The idea behind cryptocurrency and the future of the Internet (Web 3.0) was to put the power back into ordinary people’s hands, with nobody able to control or remove access to any component of the web. But the continued goal of governments and large corporations is to retain tight control of everything, which will require adoption and regulation of these assets. Only time will tell the outcome, and how each specific government will handle the growing strength of the cryptocurrency market.