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Cryptocurrency: Pros and Cons

The ban on transactions with cryptocurrency can leave the infrastructure of the Russian market behind technological innovation.

Since its inception and to this day Bitcoin remains the most popular cryptocurrency (bitcoin, BTC, XBT) operating since 2009 and whose capitalization (the equivalent of the issued coins) exceeds $ 10 billion. Because of the growing Bitcoin's popularity few noticed that over 500 similar cryptocurrencies have been invented. For now their popularity and market capitalization stand no comparison with Bitcoin, but they exist and continue to be created.

As the National Agency for Financial Studies (NAFS) study shows, 80% of Russians do not know what it is, only a fifth part of them to some extent is informed about what Bitcoin is. 4% are aware of the calculations system well, and 16% – only by hearsay. In Moscow, the awareness is slightly higher – 26%. Representatives of the Siberian Federal District are aware of this calculation system the worst of all, where 92% of respondents indicated that they have never heard of the term “Bitcoin”. Abroad, things are different. Estimates show that in Germany, a significant part of the population, 44% of participants, knows what Bitcoin is, but they have never used it before. In the US state Massachusetts a national study to examine the level of information and the use of virtual currency was conducted. More than half of respondents (51%) said that they had heard about Bitcoin and other electronic currency.

Contrary to global trends, use of cryptocurrency in Russia has long been trying to be banned. However, the Deputy Russian Finance Minister Alexei Moiseyev offered to equate Bitcoin to a foreign currency, that does not remove the prohibition on their emissions, but allow buying and subsequent use in other countries. Also it should be noted that the Russian authorities abandoned the idea to introduce criminal liability for the manufacture and use of "money substitutes", to which cryptocurrency, including Bitcoin, amounts to. This decision was taken following a meeting between the General Prosecutor's Office, Ministry of Justice, the Central Bank of the Russian Federation and the government apparatus.

For comparison: in Canada and the US, this currency is legal. Canada Revenue Agency (CRA) considers that cryptocurrency has the properties of goods and services, so its trade should have sales tax. In Switzerland, it has the status of a payment, not a product or service. Exchange of CHF for Bitcoin equals to the exchange of Swiss francs for any other currency, such as Euros. Commissions for the exchange transaction charged by Bitcoin-companies are beyond VAT. In Norway Bitcoin is recognized as stock exchange asset, but not a stock currency. In some countries, such as Germany and France, for now there is no formal decision on the regulation and its legal status, but countries are concerned about the use of cryptocurrency in illicit activities and the financing of terrorism.

Leading economist at the Federal Reserve Bank of Chicago Francois Velde proposes allowing Bitcoin in private-legal aspect for multinational corporations, holding companies, banks. He believes that this is a big plus for financial institutions that can carry out any transaction without a mediator. Velde also advises banking institutions to produce their own cryptocurrency. There is no consensus about the concept of cryptocurrency (what is meant by cryptocurrency) and its legislative regulation is not developed.

Recently, information about the fact that all transactions with these currencies are speculative in nature, as they are implemented in the so-called virtual exchanges and carry a high risk of loss of value, has spread around the world. Cryptocurrency is a paradise for ‘black deeds’, criminals and terrorists who are anonymously and illegally transfer money. However, for the maintenance of terrorism and money laundering conventional funds, any legal currency is also used. It's all about control mechanism of these processes. The myth of the speculation is caused by excessively rapid description in the press of cryptocurrency and incomplete understanding of the technology. There are different payment systems like Visa, Master Card, PayPal, Western Union, the transactions volume of which amounts to tens of thousands of transactions per second. For comparison, in the payment system Visa on average 200,000 transactions per minute are committed, while cryptocurrency allows you to make only 30 Bitcoin transactions per minute. These means of payment can be used in different ways: they can pay for any goods and services, as well as they can pay for the drugs. At present, the scale of Bitcoin economy by world standards is insignificant. The total capitalization of the Bitcoin market is slightly less than half the cost of the most expensive subway station in Manhattan. Most likely, in the near future cryptocurrency will continue building on the momentum of its distribution, and the countries, strongly limiting their circulation, will just lag behind in their development. Cryptocurrency is a kind of evolutionary leap for extending the benefits of the modern economic system. The ban on transactions with cryptocurrency, Bitcoin in particular, can leave the infrastructure of the Russian market behind technological innovation.


  • October 24, 2016 6:14 PM MSK