Through the course of this article, we will understand Russia’s new acceptance of cryptocurrency as a currency and the reason behind this new development.
The importance of cryptocurrency cannot be over-emphasized. With the unique features that this new means of payment offers to users and investors on the platform, it is highly evident that this digital form of transaction has come to stay and might be the new system of exchanges and trades in the financial market.
Many big economies have already started accepting cryptocurrency as a new means of transaction and exchange, with Russia being the latest country to support cryptocurrency and the blockchain industry.
This comes after other countries like El Salvador have legalized bitcoin as a legal tender in their country. India, a big economy country, has also supported cryptocurrency and the digital financial revolution.
The Russian government has decided to control cryptocurrencies rather than outright prohibit them, making the $ 2 trillion asset class lawful in its 11th largest economy.
On Tuesday night, the official government website published a document explaining the principles for regulating cryptocurrencies. The move is backed by the central bank that has attempted to outlaw cryptocurrency mining and trade.
This is the second significant regulatory cloud to exit the global crypto industry in less than a month. Last week, India took a step toward legalization by imposing a tax on digital asset transfers. Despite the hefty 30 percent tax rate, the crypto community and many others consider this a step toward legalizing cryptocurrency in the world’s fifth-largest economy.
Why Is Russia Considering Accepting Bitcoin and Other Cryptocurrencies as a Form of Currency?
According to government documents, Russia has 144 million people, over 12 million cryptocurrency accounts, and a total cryptocurrency market capitalization of $ 26.7 billion.
According to a paper certified by the Cambridge Center for Alternative Finance, the country is ranked third in the world for Bitcoin Mining. According to the paper, law enforcement officials are concerned that, with such a large quantity of cryptocurrencies, they will not be able to appropriately deal with cryptocurrency-related crimes.
However, it fell short of the stringent measures requested by Russia’s Central Bank in January. According to central bank reports, cryptocurrencies are a threat to Russia’s financial stability and are illegitimate. In Russia, regulators have recommended prohibiting cryptocurrency trade and mining. Instead, Russians can use digital rubles, central bank digital currencies controlled by Russian banks, and digital assets generated by licensed enterprises in their own country.
In contrast, according to a draft law presented on Tuesday, cryptocurrency purchases can be made in Russia. Still, users must completely validate them, and transaction information must be shared with government agencies. As a result, it can only be done by a registered and licensed company in the area. This document does not address cryptocurrency mining, and many of the measures would necessitate new legislation from Congress.
Cryptocurrencies will only be used in the legal sector, according to studies, if they can be completely identified through the banking system or regulated intermediaries.
The news comes only weeks after Russia’s central bank requested a blanket ban on cryptocurrency. Cryptocurrency sales, mining, and use are all prohibited under the prohibition enacted in January. According to sources, only possessing cryptocurrency and no other cryptocurrency-related activities will be allowed in Russia if the law takes effect.
Cryptocurrencies were legitimized in Russia in 2020, but they were never allowed for payment. Russia has been an outspoken opponent of cryptocurrencies for years, alleging that they can be used for illegal reasons and thus requires regulation.
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What Impact Does Russia’s Recognition of Cryptocurrency Have on the Market?
On Wednesday morning, the price of bitcoin surged by almost 3% in the United States. According to Armando Aguilar, a renowned crypto analyst, Russia’s adoption of the bellwether cryptocurrency could have “some level of influence” on its price.
Other market factors, such as the addition of bitcoin to KPMG Canada’s balance sheet and the US Justice Department’s recovery of bitcoin worth $3.6 billion from the 2016 Bitfinex hack, could enhance prices, he said.
This has put bitcoin straight back on the upswing after a recent strong dip in cryptocurrencies, causing panic sales and portfolio clearing in the crypto market.
Russia’s sudden acceptance of Bitcoin and other cryptocurrencies has made many crypto users and investors enthusiastic, especially after its initial criticisms and proposal to ban Bitcoin and other cryptocurrencies.
The fact that Bitcoin and cryptocurrency, in general, are slowly but steadily being adopted by large economies that play a key role in the global financial system is a silver lining.
Many crypto enthusiasts and investors believe that other countries will follow Russia’s trend. Among them are China, the United States, and several other nations.
What are your opinions on Russia accepting cryptocurrencies as a form of payment, and what does this mean for the crypto community? Please share your views and thoughts.