If you can’t beat ‘em, join ‘em. That old adage seems to sum up the prevailing mood in a number of national treasury departments as they contemplate how best to address the phenomenal growth of cryptocurrencies across the world.
Two things have become apparent about cryptocurrencies in recent months: they’re now a fixture of the global financial sphere and regulating them is going to prove a very tough task for any government. In order for those in power to wield any sort of control over this phenomenon, they’re going to have to start at the beginning and create their own.
Their reasons for doing so can be best summed up in one word: tax. Nothing gets governments so worked up as the thought that they’re being stiffed of their cut out there in the markets.
Russia eyes “Crypto Ruble”
It’s not all that surprising to see them starting to get in on the act. This week has brought the news that Russia is preparing to launch the ‘CryptoRuble’ in the very near future. The Communications Minister, Nikolay Nikiforov made the announcement, adding somewhat bluntly ‘I confidently declare that we run CryptoRuble for one simple reason: if we do not, then after two months our neighbours in the EurAsEC will.’
He might also have mentioned that, whilst investors will be able to exchange their CryptoRubles for actual Rubles whenever they wish, they’ll be liable to pay a 13% tax if they can’t explain where their digital assets came from.
Given the fact that Russia’s economy is still struggling under the weight of US sanctions imposed in the wake of the seizure of the Crimea region from Ukraine in 2014, the Putin administration’s move into the cryptocurrency sphere is a logical one. The last thing the Kremlin needs is for crypto trading to flourish beyond its control. Whether the CryptoRuble will prove a success however remains to be seen.
And it’s not just the Russians; other countries are also considering launching their own cryptocurrencies. In September it was announced that Japan was weighing up the idea in the form of the so-called ‘J-Coin’ albeit for slightly different reasons and on a more sedate timescale. Surprisingly for such a tech-savvy nation, the Japanese remain very much wedded to cash and a massive 70% of transactions are still carried out this way. This results in high administration and banking fees and yes, lost tax revenue. The Japanese aren’t rushing the process though, as the launch is being tentatively planned to coincide with the 2020 Tokyo Olympics.
Other Governments Join the Fray
Perhaps the most appropriate setting for a national cryptocurrency is the country that gave us the brain behind Ethereum and which also happens to be one of most connected and technologically adventurous societies on earth: Estonia. If it’s internet pioneers you’re after then this tiny Baltic state is the place to go – the country is streets ahead of virtually every other in the world when it comes to web-based services and innovation. Their national cryptocurrency program is well underway in the form of the ‘estcoin’ and with the know-how at their disposal, you wouldn’t bet against its success.
Meanwhile, down in Dubai they’re also jumping on the cryptocurrency bandwagon. The Gulf State announced that it was developing ’emCash’ earlier this month with official statements placing an emphasis on how it would ‘improve ease of business and quality of life.’ This follows the news that Dubai wants to become ‘the world’s first blockchain city’ – an ambition that underlines the vast potential of the technology behind cryptocurrencies themselves. It’s worth remembering that blockchain is a major factor behind the scenes of these national cryptocurrency ventures. This technology is going to change everything.
The final stop on our world tour of national cryptocurrencies may require a visit to Google first, as you’d be forgiven for wondering where on earth Abkhazia actually is. It’s only recognised as a state by Russia and a handful of other countries and comprises the western chunk of the Republic of Georgia. Its population of around 240,000 is marginally less than that of the London borough of Hackney.
Nevertheless, despite these limitations, Abkhazia’s is perhaps the most ambitious of all national cryptocurrency schemes. The proposed ‘Abkhazian Republic Coin’ is apparently being considered as a future replacement for ‘normal money’ in the next few years. You certainly can’t accuse those Abkhazians of lacking ambition, even if they do lack formal recognition.
No Country Left Behind
It’s no surprise to see governments waking up to the power and potential of cryptocurrencies and it’s hard to blame them for wanting a slice of the pie. Back in August the total value of the cryptocurrency market hit $150 billion and isn’t yet showing any signs of slowing down. This is a party that it doesn’t pay to be late to.
Whether these national cryptocurrencies will replicate the success of Bitcoin, find their own corners of the market or crash and burn altogether is anyone’s guess. What is beyond doubt is that other countries will be keeping a very close watch on how the CryptoRuble, estcoin and others fare as they contemplate cryptos of their own. Who knows, before too long perhaps we’ll all be able to point out Abkhazia on the map.
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