Vladimir Putin is apparently not a supporter of the worldwide cryptocurrency phenomenon. According to a presentation in Sochi reported by Bloomberg, the Russian president denounced the currency as a risky investment. Putin argued that the currency’s used in money laundering and drug trafficking schemes meant that it would continue to pose problems for Russia and other economies for the foreseeable future. He also called for regulations on the currency similar to the ones currently being mulled over in other countries. However, Putin stopped short of an outright ban on Bitcoin and other crytocurrencies, stating that there should be barriers to their usage but that they should not be excessive. This stance places him at odds with China, which has taken steps to ban cryptocurrency in recent months.
Putin Calls BitCoin a “Pyramid Scheme”
In some ways, Putin’s public stance signals a worrying trend for the future of bitcoin in Russia. The Russian central bank has already echoed Putin’s statement by comparing bitcoin to a pyramid scheme, one in which all the money invested goes to people at the top. This statement looked at though it might stem bitcoin’s rally in price, but in fact the effect was the opposite. Bitcoin was up over 8% the day of Putin’s announcement, giving it a 400% gain for the year.
What to make of this disparity? First, Russia is not a particularly key part of bitcoin’s growth agenda or the growth of any other cryptocurrencies. Despite its place in the American news media, it is not one of the five largest economies in the world. It is mostly an economy built on raw materials and manufacturing which do not lend themselves well to using bitcoin. The country’s autocratic structure means that predictions about the future success of a new venture are always sketchy at best. This uncertainty is why bitcoin has focused so much on more stable Western economies and has seen tremendous growth over the years. Therefore, even if Putin did try to curb bitcoin in Russia, it would not be a significant factor in the development of cryptocurrencies.
Russia Talks Banning Bitcoin
But more importantly, it would be difficult for Russia to ban bitcoin even if it tried. Cryptocurrency is notoriously hard to track and use, and Russia’s vast underground network of hackers and shady characters have been eluding the country’s laws for decades. Banning bitcoin would prevent some of the more outward-facing customer interaction tools, such as ATMs and advertisements. However, the currency would still be able to exist and grow inside of the country. Russia’s corrupt and sclerotic state would have a difficult time tracking down every usage of bitcoin throughout the country. The prospect of a Putin crackdown does not keep bitcoin investors up at night.
Bitcoin investors should be weary of developments in Russia. A Russian crackdown on bitcoin may harm some users and convince other countries to back off on their allowance of the new technology. But a crackdown certainly would not end the currency. Bitcoin, no matter what Putin says, is here to stay.