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Passions run high over need for virtual money in Russia

September 18, 2015, 19:23 UTC+3 Alexandrova Lyudmila
© AP Photo/Mark Lennihan

MOSCOW, September 18. /TASS/. The idea of virtual money in Russia has caused controversy in the country. This idea is opposed by many Russian officials, first of all, due to the potential danger of its use in dubious financial operations. Russia’s Central Bank is maintaining a cautious line on this issue while experts say the specific project that is currently under discussion is not a very good idea.

Russia’s Qiwi payment system will start issuing bitrubles next year, using the technology for the creation of bitcoins, the most popular cryptocurrency today, Qiwi CEO Sergey Solonin said recently.

Qiwi is the first company trying to launch its own virtual currency into circulation in Russia. Today the bitcoin is mostly used in the world as a cryptocurrency, which Internet users can buy with ordinary money or earn.

Russia’s financial ombudsman Pavel Medvedev characterized Qiwi’s plans as a crime. "This is absolutely illegal and such technical hooliganism is absolutely illegitimate. The Constitution says it is the prerogative of the Central Bank to print money. The ruble is the sole currency in Russia. All other monies are illegal and such wrongdoing is criminally punishable," Medvedev said in an interview with Moscow Speaking radio station.

The Russian Central Bank and Prosecutor General’s Office warned in January 2014 that virtual money could be used for terrorism financing and money laundering and, therefore, settlements with cryptocurrencies would be regarded as dubious operations. Russia’s Finance Ministry published a bill in October 2014 imposing penalties for the use and spread of virtual money but it was criticized by the Economic Development Ministry. As a result, the bill was not even submitted to the State Duma, the lower house of Russia’s parliament.

Central Bank Governor Elvira Nabiullina said at a forum in Kazan on Thursday that the regulator was studying this issue because this topic could not be ignored. "We’re not banning cryptocurrencies, we’re studying them," she said, adding unintentionally in a slip of the tongue that surrogate money was banned in Russia after all. "The regulators of virtually all countries do not know what to do with this," she said, noting that the Russian monetary regulator had grown accustomed to be the issuing monopoly center. "Somewhere it [surrogate money] is banned for use by corporate entities while private individuals are allowed to use it while somewhere taxes are levied on operations with it and so on, i.e. there is no world standard," she said.

"It seems to us as professionals in this area that this is not the thing that should be banned," Sberbank CEO German Gref said. Gref admitted he owned a small amount of bitcoins.

"If Qiwi wants this to be the rubles, the money guaranteed by the state, they will, of course, need the Central Bank," Board Chairman of the Electronic Money Association Viktor Dostov said in an interview with Kommersant FM radio station.

"They can issue it themselves because there is no formal ban on bitcoins, blockchains and the like in the country, even though Russia has a cautious attitude to bitcoins. But as far as I understand, the idea is ambitious and is precisely linked with the work of the Central Bank," he added.

In the expert’s opinion, the emergence of bitrubles will most likely stay out of the population’s sight. "Now the population uses credit cards, electronic money, Internet-banking and another instrument will appear."

"It seems to me that this is more needed for Qiwi than for the population or for some financial structures," Professor of the Higher School of Economics Alexander Abramov told TASS.

"As far as I understand, the talk is about some form of borrowing money from the population through the issuance of this virtual currency," the expert said, calling this idea "a somewhat risky experiment."

"I’m not categorically against bitcoins as an idea," the expert said. "We see that the bitcoin is living through a difficult period of evolution in the world and no one bans it categorically. But Qiwi’s specific project amid strong instability in the banking system and the great demand from individuals and organizations for funds causes some doubt and suspicion that a different product like a promissory note or a bond, instead of a really alternative currency, is sold under the guise of another product."

Even if it is presumed that Qiwi’s currency will be similar to the classical bitcoin, there is great danger that a good idea may turn simply into a method of "grey financing" of an organization by mass investors, Abramov said.

This theme will encounter tough resistance from the Tax Service, the expert said.

"Despite [Central Bank Chief] Nabiullina’s liberal position, I believe that this will be a strong irritant for the Central Bank because it will not tolerate any rival to the ruble. The Central Bank is trying to make the ruble stable and any mechanism, which is introducing an alternative currency that somewhat affects this stability, will be limited by the regulator, as it seems to me," he said.

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