Russia loses its future by banning Bitcoin, or another cryptocurrency eulogy

15.04.2015

ForkLog has always been closely monitoring the events related to banning of Bitcoin and other cryptocurrencies in Russia. According to one of our authors, Russian authorities’ refusal to embrace Bitcoin is somehow equivalent to the lost opportunity of creating Internet in the USSR. But now we decided to consider Bitcoin integration from another point of view: can it become a peculiar way to even the effect from economic sanctions levied against Russia? This item is covered by our experts: Ivan Tikhonov, bits.media founder, Mikhail Chobanian, KUNA Bitcoin Agency CEO, and Alex Fork, renowned Bitcoin enthusiast.

Disclaimer
Forklog holds no political views, and does not stand for or against levying/lifting economic and political sanctions from Russia.

This material was inspired by Mikhail Chobanian’s comment made for a renowned Russian magazine during Bitcoin Conference Russia. Back then, he invited the journalists to consider Bitcoin in the context of anti-Russian sanctions. That reasoning, quite obvious yet weighty enough, has most likely induced musings amongst most of those who had heard it.

In an interview to ForkLog he said:
“A state that supports Bitcoin will become an equivalent of the Silicone Valley. Developers and investors will be invoked, and they will do their best to work in that country. Russia would have seen direct investment in economy, development, prospects, and future”.

Of course, current Bitcoin capitalization is too small to satisfy credit and investment needs of a whole country. But, had Russia officially permitted Bitcoin investment and remittances, many medium business issues in Russia would have been probably solved. That permission would have been appreciated by some of Russian regions as well.

Crimea Isle

Crimea and Sebastobol, following the events of March 2014, now embrace ambiguous international status. Regardless of major monetary injections in new Russian regions, Crimea residents have suffered the most from their ‘return back home’. In early 2015 several major companies kissed them goodbye: those were online retailers eBay and Amazon, as well as manufacturers HP and Dell. Google did not stand apart as well, and limited application of some of its services, while Apple restricted access to App Store applications. Moreover, PayPal and Payoneer services do not work in Crimea, while Visa and MasterCard suspended their cards servicing back in 2014. A few days ago Crimean fans of WoW and Diablo also found themselves banned from access to any of Blizzard projects by the producer.

All those problems were pouring down on the peninsula residents while banks were closing one by one, which subsequently resulted in essential problems with non-cash remittances. However, some of Crimean residents have already twigged how Bitcoin could help them solve the problems the new authorities generated. However, in that case, Bitcoin acts as an intermediary transaction agent, rather than a direct instrument of payment. According to expert opinions, Bitcoin integration could resuscitate economy of Crimea as this process would require any involvement from banking entities that had refused to operate there. Sending and receiving of money with Bitcoin would have become not just available, but also instant and inexpensive. Broadly speaking, several dozens of two-way Bitcoin ATM’s could establish an economic zone independent from banks.

Import substitution using Bitcoin

Following introduction of Russian retailatory sanctions against Western countries, issues cover not only importing several groups of products. Instead of marbled beef, jamon and other gourmet items, Russians are now offered to feast with buffalo steaks or python stew. And, unfortunately, we’re being serious. Cooperation between Russian and foreign companies that had been developing for years, is now also demolished or damaged. Losses from ‘antisanctions’ are incurred both on Western and Russian entrepreneurs, while the key to solving all those issues may be somewhere in a Bitcoin wallet.

SWIFT and brain drain

Lately Russian politicians were threatened by another kind of sanction, that is disconnection of Russia from SWIFT network. In current situation this, in fact, would mean financial besiegement and futher conservation of local economy. One should notice that Western countries have been just talking about that punishment so far, but, had this happened, this would have not been the first instance. Thus, back in 2013 Iran got disconnected from SWIFT by the EU. Now, certainly, Iran ceased being the world’s bad guy #1. Iranian banks have just started negotiations concering the country’s return to the international banking system.

However, if Russia integrates Bitcoin or creates its own SWIFT counterpart on its basis, no disconnection will be really threatening as no one can deprive you from Bitcoin network apart from electricians and natural disasters. Such system could become a real revolution for banks by significantly cutting operational costs. We might even consider some Utopian issues here for instance, by using block chain, one could create their own international remittance system and drive dinosaurs like Western Union and MoneyGram out of market.

Russia’s unwillingness to work with Bitcoin deprives it from another value, that is skilled workers. Drain of real Bitcoin professionals just provides their skills to another country, so all new discoveries and opportunities will eventually detour Russia.

“There are enough programmists in Russia that don’t require no involvement, they just need to have their conditions, and then they’ll be happy to stay and work in Russia” says Mikhail Chobanian.

According to another spokesperson, Alex Fork, ‘brain drain’ and ‘investment drain’ from Russian Bitcoin industry is on the uptick.

“The best example is my partners and myself. We were planning to create a cryptocurrency exchange, and we had a great investor who owns three banks. He wanted to develop that trend in Russia. But, following the info letters from the Central Bank about upcoming ban of Bitcoin, he rejected. That’s where it actually ends. Another example that I know of is those guys from Chelyabinsk who purchased a land plot for a giant mining farm. Investment went up to 170 million roubles (about 5 million dollars back then). That money was scheduled for building a village for Bitcoin community and Bitcoin mining farms. The village could use the heat generated by miners for free. But, after the announcement from the Central Bank, they scaled down the project as well” says Alex Fork.

So, when it actually comes to cryptocurrency banning, in 5 to 10 years all those people ‘formerly known as Russians’ may return back as foreign company representatives just to finally get back to their new country of their jurisdictions to pay taxes and create new work positions.

Part II. Part II includes ‘a funny carnival’ at Russian State Duma, need for a Bitcoin lobby, and many amazing opportunities Russia rejects

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Tags: Bitcoin, cryptocurrencies, regulation, Russia