When Putin talks, the world listens. And now the ever controversial President is setting his sights on Bitcoin, having recently talked about digital currencies for the first time on Russia 24.
Up until the recent remarks, Putin has largely stayed mum on the use of digital currencies and other related technologies. And while his recent comments were somewhat vague, they still represent a step forward.
In truth, Putin didn’t mention Bitcoin by name, but instead addressed the larger issue of digital currencies. Regardless, with Bitcoin being far and away the biggest and most prominent digital currency in the world at the moment, his comments were closely watched by Bitcoin users in Russia and around the globe.
As in many other countries, Bitcoin’s status remains unclear in Russia. Many Russian banks won’t handle any accounts related to Bitcoin, and many businesses are weary of accepting it as payment. Even mining operations are questionable in the country. Regardless, a vibrant, largely underground Bitcoin community has cropped up.
So far, Putin appears to be taking a cautious, step-by-step approach, and has acknowledged that the country’s central bank, the Bank of Russia, took a moderate approach to exploring and considering new technologies. Putin stopped well-short of endorsing Bitcoin, noting that the use of digital currencies could become problematic.
At the same time Putin didn’t rule out the currency’s potential, but seemed to hint that for now the country would continue to take a hands off approach. The Russian President did note that there could be serious, fundamental issues if digital currencies were adopted on a wider scale. Nevertheless, he also acknowledged that using digital currencies as an “accounting unit” is an idea with potential.
Putin’s sharpest criticism directed towards Bitcoin is that it isn’t backed by anything, nor is it linked to anything. Bitcoin users could fire back that the mining process, which requires computing power and electricity, actually instills a certain value in the currency. Further, national currencies are now fiat currencies and no longer tied to gold or other commodities. Within this context, it’s fair to wonder if such currencies really have any more of a claim to being “backed” than Bitcoin and other digital currencies.
As of right now, the Bitcoin community in Russia has been reacting positively to Putin’s brief words. While the President stopped far short of endorsing digital currencies, and his statements were largely vague and non-committal, the simple fact that he didn’t flat out reject the concept or use of them is being seen as a positive development.
Bitcoin users in places like Russia, Iran, India and other countries that are prone to suffering high inflation rates should be careful, however. Bitcoin offers a clear alternative to national currencies and a way to protect wealth against inflation. For governments operating under the constant threat of high inflation, Bitcoin could be seen as a rival and even a threat. The possibility of governments taking action against cryptocurrency simply because it presents a better value than national currencies is very real.
For now, however, Bitcoin users in Russia will be able to breathe a little easier.