Yesterday, two pieces of commentary on digital currencies came from Russian authorities, neither particularly supportive. The head of the Bank of Russia said that it is against private currencies in any form, as they threaten financial sovereignty. Meanwhile, the Ministry of Internal Affairs plans to implement measures allowing it to seize digital currencies in the case of criminal activity.
The central bank on private currency
Speaking at Russia’s State Duma yesterday, central bank lead Elvira Nabiullina said: “We are for financial technologies to develop. But we do not support private money in any form, digitally or not. If they replace public money, they will destroy both monetary policy and financial stability.”
She joins many others in the recent uptick of conversation around privately run ‘stablecoins’. A recent G7 report concluded that private digital currencies are a systemic risk. While the Bank of Russia is clearly against such projects, it is looking at public central bank digital currencies (CBDCs).
Nabiullina continued: “At the same time, we are studying, like many countries, the digital currency of central banks. But this is a process of studying, and we need to look at what we will get from this digital money. What will be an additional advantage, compared to the fact that we are developing an electronic money transfer system.”
Russia’s National Settlement Depository revealed last month that it has conducted detailed research into CBDCs, along with many blockchain projects including work with Hyperledger. The country’s Pension Fund shared plans to use the technology for employment contracts. Now, as Nabiullina stated, the central bank is working on an electronic payment system.
“But we are ready to watch digital assets that do not replace government money. Let private business work here,” she added.
Seizing virtual assets
As RBC reported yesterday, Russia plans to build infrastructure to confiscate virtual currencies. These will mostly be cryptocurrencies, as in the case of hackers demanding Bitcoin to release stolen data, said Nikita Kulikov.
The member of the State Duma’s expert council suggested that usual seizure laws of cash or property should apply to digital currency.
However, this comes with many challenges. To seize cryptocurrency, Russia must recognize it as having value. With today’s comments, it’s unlikely the Bank of Russia would be happy with doing that. Its negative view of cryptocurrencies probably influenced Russian tech provider Universa to confirm that today’s Tunisian CBDC it worked on was entirely separate.
Along with recognition, Russian authorities would need to set up a digital wallet to collect virtual currency, Kulikov pointed out. Even then, crypto owners could refuse to share their private key. Then authorities must prove the assets belong to the owner, without the usual identifying information of a bank account.
Say that Russia manages to seize some digital currency, how would they store it to avoid volatility? Kulikov suggests something that sounds like a CBDC: “For these purposes, they can create a state crypto-exchange and crypto-ruble with a stable rate in which they will store the withdrawn funds.”