Russia’s Crypto-Ruble Just Changed the Game
by Tom Luongo
ZeroHedge.com
Oct 17, 2017
For weeks now we’ve been getting very mixed signals out of the Russian Government about cryptocurrencies. On the one hand we see it embracing the new technology while at the same time going on the warpath against them. Because of that there is a lot of confusion in people’s minds as to what the endgame for cryptos in Russia looks like. I’ll try to clear this confusion up given what we know.
But, suffice it to say, this is very good news for both Bitcoin and the Russian economy. Give me a few minutes and I’ll explain why.
Putin’s Law
Vladimir Putin is very much a law and order kinda guy. If you watch Putin operate in the public arena he always does so with an eye towards the law. He believes strongly in the law. And cryptocurrencies, despite their obvious benefits to a Russian economy that needs the type of disintermediation cryptos offer, operate in a legal gray area that makes Putin uncomfortable.
So, the goal with Russian official crypto-policy is to stamp out the illegal activities – the money laundering, terrorism-financing, human-trafficking, etc. – while simultaneously using the technology to modernize Russia’s internal capital handling capabilities.
This is what the crypto-ruble is all about. It is a way for Russia and Russians to provide a gateway between the crypto-world and the so-called real one. It ensures that this new form of ruble properly tracks capital flow through the Russian economy.
By taxing crypto-rubles at the capital gains rate for those that cannot provide a paper-trail of ownership, Russia and Putin are incentivizing the development of low-cost crypto-payment systems to exchange rubles for goods only in cryptocurrencies that also track ownership, like Ethereum and others that have transparent blockchain histories.
The Russian Capital Invitation
Putin is openly inviting investment capital into Russia that is legal and above board. Russia wants legitimate businesses to operate in Russia in whatever currency they like as long as that business is transparent.
The crypto-ruble provides the means by which to convert, transaction-cost-free, back into the national ‘fiat’ currency to pay bills, taxes and the like. This is in direct opposition to how the U.S., for example, treats cryptocurrencies.
The 2014 I.R.S. rule that classified Bitcoin as ‘property’ means that every Bitcoin transaction, no matter how minor, creates a potential capital gains event. It means that buying a cup of coffee at Starbucks in Bitcoin is taxable for both the person buying the coffee (capital gains on the sale) and Starbucks when they go to sell those Bitcoins, buy dollars and pay salaries, order supplies, etc.
It’s why the capital that has moved into cryptocurrencies isn’t moving back out. It’s why the ICO market has exploded. Billions in profits actively looking for new investment opportunities without paying taxes.
It’s also the main reason why Amazon, for example, doesn’t take Bitcoin. Who wants that hassle?
Can you imagine Amazon’s Schedule D if it accepted Bitcoin?
The crypto-ruble’s structure dispenses with that for those that can prove ownership via the blockchain. Bitcoin allows for transaction transparency, so does Ethereum, Litecoin and many others.
Now, cryptos can exist side-by-side with rubles without worrying about the threat of double taxation, unless you earned your money in the murk, at which point Russia wants 13% capital gains. This new system won’t bring that capital back into the Russian economy, but it wasn’t coming back anyway.
Russia Embraces its Own Cryptos
By calling Bitcoin as a Ponzi scheme and an avenue for money laundering Putin and the Bank of Russia are simply attacking technologies that are not home-grown. They are, like every other person in the markets, ‘talking their book.’
Putin would prefer people use platforms that are Russian. Remember, he’s also a nationalist trying to bring Russia prestige in this important market going forward.
Ethereum and WAVES are both platforms designed by and built for Russia. So, you’ll notice that Putin has never spoken out against Ethereum. WAVES continues to fly under a lot of people’s radar, but it is just as disruptive as Ethereum.
The Rest…HERE
