Lessen that a year after making direct threats to imprison anyone caught trading in cryptocurrencies, the Russian government has seemingly had a sudden change of heart and is now in the process of drafting a bill that would pave the way for bitcoin, Dash, Lightcoin, One Coin, Ether and other cryptocurrencies to be traded legally.
For those who are unfamiliar with the way the Kremlin and Russian President Vladimir Putin typically work, this sudden about face is highly unusual. The Russian government usually doesn’t admit it was wrong, which means that there must be quite compelling reasons for its sudden acceptance of digital currency.
The Problems Facing the Russian Economy
However, the reasons are quite obvious for anyone who’s even slightly familiar with the Russian economy and finance sector. The country’s economic has been struggling mightily since early 2014, when its invasion and annexation of Crimea led to massive economic sanctions put in place by the United States and its allies in the European Union. Combined with the huge drop in oil and gas prices, this has left the Russian economy devastated, and many banks have been particularly hard hit.
This downturn in the banking sector placed a strain on available cash resources. However, at the same time the Russian government has been undertaking a massive anti-corruption effort meant to eliminate corrupt and/or inefficient banks. As a result, the government has closed more than 100 banks in just three years and plans on closing many more over the next year or two.
Closing these banks has forced the government to pay out well over $50 billion, which has further strained monetary reserves. The Russian government realizes that major cash shortages could lead to huge social problems, and therefore, it hopes that legalizing cryptocurrencies will enable more businesses to overcome these cash shortages.
Using Blockchain to Prevent Money Laundering
In addition to preventing these cash issues, the Russian government is also counting on the blockchain strategy employed by most digital currencies as a way to help fight against money laundering. Despite the original fears about the anonymity of cryptocurrencies, the blockchain technology makes it simple to track every single transaction.
By gaining the ability to properly track all transactions, Russia hopes to be able to use blockchain as part of the solution to the major corruption and money laundering issues that currently plague its economy. In fact, some have even gone as far as to suggest that the Russian government may attempt to implement and regulate the use of blockchain technology to run its entire banking and finance sector.
It is still far too early to tell whether this will be the case or not. However, the fact that cryptocurrencies will soon be legal in Russia shows that those higher-ups in the government and finance sectors are definitely starting to wizen up to the benefits that blockchain can and does provide. The ultimate decision will ultimately come down to Putin and the top government officials, but it definitely seems that there is some hope that blockchain may be able to help Russia finally deal with its fraud and corruption problems.