Russia performs Bitcoin u-turn, but what's that about an investment vehicle?


Earlier this month, in quite a surprise move, the Russian government had hinted at the possibility of making cryptocurrency a recognized form of currency within Russia's borders.

This was quite a surprise, given that the Ruble, Russia's sovereign currency, is often subject to dramatic revaluations and has been highly inflationary over recent times.

Most traders, and certainly almost all Russian citizens can remember at least two recent events in which the Ruble dramatically lost its value very quickly, resulting in a situation in which people had to spend their salary on the day they received it in order to avoid it being worthless the next day.

Given that the government has viewed cryptocurrency with trepidation in the past, especially when considering that, if it got into the hands of the wider public and was legally allowed to be used as a method of payment, any form of capital controls or government interference in the lives of the population via currency revaluations would be quashed.

In a very much opposite move to what the investing public has come to expect from the Russian government, after meetings with the central bank, officials reached an agreement to draft legislation or amend existing laws recognizing crypto as a form of currency on February 9.

The idea behind this move was to bring cryptocurrency into the mainstream, not in order to empower the population and give them a globally-accessible tool in order to move away from the local market and remove their dependency on the Russian state and its banks, but more likely to be able to regulate the use of cryptocurrency in Russia, as it is hugely popular among young entrepreneurs who wish to improve their business opportunities and stores of value away from the uncertainty of the local market.

It was, however too good to be true.

Today, it has emerged that the Russian government's talks with the central bank have hit a brick wall, as the country's Finance Minister has publicly stated that cryptocurrency should not be recognized as a legal form of currency.

Specifically, despite the government and the central bank's approval of the plan to give Bitcoin legal tender status as part of the country's move forward with crypto regulatory plans, the finance ministry is against such a move in any form.

The finance ministry's view is that cryptocurrency should be treated as an investment vehicle, and not as a form of legal tender or as a payment method, reinforcing the current policy in Russia which does not permit cryptocurrencies to be used as a form of payment.

The news that the finance ministry wishes to ban cryptocurrency as a form of payment is perhaps far less surprising than the initial news that the government was planning to allow cryptocurrency as a form of payment at all in Russia, hence the markets have not been affected at all by today's bombshell.

It's more likely that analysts will focus on the statement by the Russian finance minister that cryptocurrency should be viewed as an investment vehicle, as that at least does demonstrate a degree of approval.

Today Bitcoin is up 117.72 points against the US dollar, with values standing at $37,141 during the early hours of the fiat currency trading period in Europe.

It is still down by almost $8,000 compared to last week, but that is the volatile nature of Bitcoin trading and a large part of its appeal.

Certainly Russia's government having had these discussions is of great interest, but ultimately the main snippet here is that the government approves of its use as an investment vehicle, therefore showing the world that a large market for cryptocurrency is sustainable in Russia.

Mining and e-payments, however, are a different matter!

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

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