Another country has a fumble with blockchain. According to local news shared by Colin Wu of Wu Blockchain, Russia, the belligerent country led by an egomaniac has abandoned plans to build a cryptocurrency exchange. Anatoly Aksakov, a State Duma Member, reportedly stated that the country would instead write rules to allow the private sector operate crypto exchanges.

Plans for a government operated crypto exchange date back to around 2022. This was when Russia’s President Vladimir Putin passed a law that banned digital asset payments within the country. The state’s central bank and legislature were at the time locked in a heated debate about whether to regulate cryptocurrency or ban it completely (which was the option that the Bank of Russia chose).

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Since then, Russia’s government has been considering introducing a “experimental law regime”, opening the door to crypto being used in export and import deals. It also considered assigning “special organisations” the task of mining cryptocurrency, and processing international crypto payment. The government has also embraced the idea of using stateless currency like bitcoin and permissionless stabilcoins in order to avoid international sanctions.

It’s a good example of the rampant cronyism which has been endemic since the fall of the USSR. This is also a way to put a bow on Russia’s odd stance towards crypto.

The English-language media may have mistranslated Russia’s plans to create a national agency that would license and supervise crypto platforms or overstated the fact that Russia wanted to set up a state-run exchange.

Is it shocking that an autocracy takes a hot-and-cold approach to crypto? Crypto is a set of technologies which can be used to undermine middlemen and despots. Putin imposed capital controls within the country to support a weak ruble. This influenced his decision to ban cryptocurrency. In his efforts to expand power abroad, Putin has also turned to crypto. Crypto’s inability to be governed is a double edged sword for the nation.

Opinion

Anna Baydakova, my colleague, reported in April that only recently did Russian leaders realize that crypto was inevitable, and it would be better to write regulations rather than bans. This is particularly true given that Russia is effectively cut off from the U.S.-dollar-driven global economic infrastructure.

Oleg Ogienko, the CEO of BitRiver’s a major Russian mining firm, applauded the latest move by the Finance Ministry, saying it would “minimize risks of sanctions” and “eliminate any possible market monopolies.” This is a country that’s known for its oligarchs just as much as its vodka.

The exact crypto exchanges that will be permitted to operate and the internal controls that they must follow are still unknown. Izvestia stated that the central bank will “probably” supervise these platforms. The Department of the Ministry of Finance for the Russian Federation could also be a contender. Russian crypto exchanges are exempted from dealing with U.S. residents and the rest of the world.

Crypto has a peculiar place in international politics. Since years, Russians have used stablecoins such as tether to transfer money into and out of their country. However, in general neither the U.S. or EU has been concerned with crypto being used by to avoid their economic blocks.

Cryptocurrency is, without a doubt, an incredibly useful tool for those around the globe who are looking to protect their wealth against volatile fiat currency or government seizures. The industry is not a major threat to the existing order. Crypto tends to over-promise and under-deliver, especially when it comes down to disempowering The State.

Blockchain has instead become one of government’s most powerful tools for financial forensics. The crypto is a big reason we can estimate how much North Korea makes from ransomware attacks and internet attacks. It’s also how U.S. agents have tracked down drug kingpins of the digital age. Crypto represents a small fraction of the global crime estimates. However, any crime that involves blockchain technology becomes a honeypot.

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Crypto’s ability to empower individuals is why it poses less of a risk in aggregate. If Russia thought that crypto could be used to evade capital controls in a mass scale, it failed to take into account the UX/UI problems which prevent countless individuals from fully integrating with the crypto economy or the extent on ramps into crypto. Crypto is powerful for those who are aware of what they’re up to, but it’s a poorer version Venmo for the rest.

Crypto is primarily a symbol, one that draws heavily on the U.S. ideals of freedom and sovereignty. It’s sad to see Russia liberalizing the crypto industry while the U.S. is working to wipe it out.