Legal prospects of cryptocurrency in the realities of sanctions
For some, cryptocurrency in the realities of sanctions has become a necessity, and not just a speculative tool: it is necessary to somehow conduct international transactions when Visa and Mastercard do not work. Let’s talk about how the governments of different countries and international financial institutions will react to the increase in the use of cryptocurrency in the very near future.
El Salvador
To assess how the recognition of cryptocurrencies as legal tender will affect the lives of countries, it makes sense to observe the experience of El Salvador.
Firstly, the very fact that El Salvador has become an advanced country in this respect is indicative. The financial system of El Salvador, one of the poorest countries in Latin America, remained dysfunctional for a long time. The recognition of Bitcoin here was a forced step, one of the attempts to solve the accumulated economic problems.
Secondly, the integration of Bitcoin into the economy of El Salvador was difficult. The government developed the Chivo digital wallet, but the service turned out to be very raw and often disconnected. This resulted in thousands of people gathering in the capital of El Salvador in a mass protest against President Nayib Bukele and even started burning bitcoin ATMs, but this did not stop the Bitcoin legalization process.
Thirdly, the reaction of international financial institutions to the recognition of Bitcoin was very negative. The IMF called on El Salvador to abandon Bitcoin as legal tender.
Formally, it was announced as follows: the IMF claims that El Salvador’s financial stability has plummeted during the pandemic, which means that the country will need structural reforms for which the IMF could provide loans. If El Salvador is unwilling to abandon Bitcoin, the IMF threatens not to provide loans. However, this did not frighten El Salvador, and Nayib Bukele continued to stand his ground.
Fourthly, the El Salvador Chamber of Commerce recently conducted a study that surveyed 337 companies between January 15 and February 9. According to this survey, 14% of companies said they have transacted in BTC after accepting Bitcoin as legal tender. This is not as much as many crypto enthusiasts would like, but it is enough to put crypto skeptics in their place.
In general, it can be expected that countries with big problems in the financial system will be the first to legalize cryptocurrencies and that international institutions such as the IMF will be hostile to this. Countries with a destroyed economy still have nothing to lose, payments in cryptocurrency will gradually begin to enter life anyway. Even if only 14% of companies will use cryptocurrencies, this is already a serious reason to think about investing in this industry.
Cryptocurrency in Russia
Prior to the unprecedented sanctions pressure on Russia, various authorities in the Russian Federation did not come to a consensus on cryptocurrencies. The Central Bank called for a ban on mining, issuance and circulation of cryptocurrencies in Russia, proposing a very tough bill in its content. However, the Ministry of Finance takes a different position, opposing the ban on cryptocurrencies and proposing a bill aimed at legalizing the crypto market in Russia. The FSB also spoke out against the ban. Putin also noted Russia’s competitive advantages in cryptocurrency mining.
After sanctions fell on the Russian Federation, a much more loyal attitude towards cryptocurrencies began to be observed at the top. Now the Russian Foreign Minister, Sergey Lavrov, says that a very significant segment of international payments will be carried out in cryptocurrency. The Minister for Integration and Macroeconomics of the Eurasian Economic Commission, Sergey Glazyev, also calls for the speedy legalization of cryptocurrencies.
The reason for such a sharp change in sentiment is understandable — in the face of global pressure from the entire traditional monetary system, cryptocurrencies are becoming one of the ways to circumvent restrictions. The more liberal the Russian government treats cryptocurrencies, the more displeasure it will cause on the part of Western financial institutions. But, in the current realities, there is not much to lose.
And is it worth it to kill the goose that lays the golden eggs? Most likely, a significant part of crypto-investors will only be happy to get out of the gray zone and pay taxes if an adequate legal framework is formed. There are enough reasons for optimism, but not so much that we will see cryptocurrency as a means of payment in the near future. However, if a cryptocurrency is considered a digital asset, then a barter exchange for another asset is quite possible.
Crypto-offshore
However, not all countries have the motivation to legalize cryptocurrencies. Although China, in some ways, is also in opposition to the Western financial order (although many would argue with this), it has decided to ban cryptocurrencies. The formal reasons for this were voiced by the National Bank of China as the fight against fraud and the financing of illegal activities, but a deeper reason may lie in the energy shortage: China has a very large population and huge industrial capacity, so they cannot afford energy to be spent also on maintenance. decentralized financial infrastructure. The ban on cryptocurrencies in China has already led to miners leaving for Kazakhstan or Russia.
In the West, most likely, they will not ban cryptocurrencies, but will create a very tough legal environment for them (Cyprus and Zug may be exceptions), due to the very strong power of central banks, the IMF, etc. Some countries can take advantage of this situation by creating soft conditions for crypto startups. Dubai can become such a crypto-offshore. Now the UAE is implementing a wide range of initiatives and projects aimed at the development of financial technologies. These initiatives include sandboxes and test licenses for startups, as well as the DIFC FinTech HUB, which is the first and largest fintech accelerator in the region. It is possible that many crypto companies from the Russian Federation and Belarus will turn their attention to Dubai.
The leadership of the Russian Federation and Belarus can also greatly puzzle Western countries if they decide to create a favorable legal field for the crypto industry and become crypto-offshores themselves.
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