Following Russia’s proposal to ban all mining and exchanges involved with cryptocurrency, some technology and political executives have voiced opposition against the proposal.
The proposal from January 20th, 2022 suggests the halt of cryptocurrency issuance, operations, banks buying or investing in cryptocurrencies, and exchanging cryptocurrencies for fiat. Also proposed are the tracking of all current cryptocurrency owner transactions, legal liability for those accepting cryptocurrencies for services or goods, as well as blocking cryptocurrency mining.
Telegram CEO Pavel Durov made a statement on Telegram explaining that the ban “will lead to an outflow of IT specialists from the country and destroy a number of sectors of the high-tech economy.”
It is important to remember that this ban does not only affect Russia, but neighboring countries as well. Durov goes on to explain that Ukraine and Uzbekistan will also be subject to these bans because commerce occurs frequently among these nations. “These states do not want to be left on the sidelines of technological and economic progress.” says Durov.
IT specialist and Russian politician Leonid Volkov who has been accepting cryptocurrencies, including bitcoin, as donations for campaigns is not as concerned with the proposed ban. From Telegram he states, “Technically, ‘banning cryptocurrency’ is the same as banning person-to-person transfers (i.e. impossible).”
Volkov then explains how transactions will continue through decentralized exchanges like localbitcoins and that officials will not know how to circumvent that process. For example, Bitcoin is a decentralized network but centralized exchanges hold a large amount of bitcoin that they sell to their users. Exchanges are required to hold the personal data of users and go through regulated procedures to operate in each country. A decentralized exchange acts more like a peer-to-peer marketplace meaning that there is no entity on whom to enforce the ban. Russian authorities would need to find and stop every individual using such a service in order to stop a decentralized exchange from operating.
While cryptocurrencies may still be able to circulate in and out of Russia, Durov states that the path that the Russian government is choosing will not benefit the people. It may benefit a few in the short term but cryptocurrencies will likely still have a presence in the country due to the difficulty of enforcing any bans. Essentially, a lack of government support would stifle and prevent innovation that would otherwise flourish without the intended effect of a ban.