Technical Director of RosKomSvoboda Stanislav Shakirov has told CoinFox about the consequences of the possible bitcoin ban in Russia and how the group helps to push the issue into the political spotlight.

CoinFox: What can attract financial regulators and authorities to the blockchain?

Stanislav Shakirov: Blockchain, in fact, can be used as a new type of database that can provide a higher degree of confidence for the state and financial institutions in carrying out deals and transactions. These databases are impossible to hack, change existing records in them, or tamper with them anyhow. Besides, this technology allows reducing expenses.

CF: Why the first impulse in Russia was to ban bitcoin?

SS: They want to ban bitcoin because they fear it would compete with the ruble. There is a standard concept of the state, and one of its fundamental postulates is that a state should have its own currency. When another currency enters its territory, it raises the question of the state sovereignty.

It is only recently that Russian statesmen learned to distinguish bitcoin from blockchain. They have realised that these are actually different and understood what the difference is. It was then when all that political populism began that blockchain is good.

For a long time, officials did not understand bitcoin whatsoever. That is why the question of its ban as an alternative currency was posed and is still there.

The ways they regulate bitcoin are different in different countries. In the US, depending on the state, bitcoin may be considered to be either a digital currency or a commodity. There is no unified legal position yet among various countries. In some places, it is not regulated at all, and in others, you need to get a license to carry out banking activities and pay about a million dollars for it, as in Europe.

CF: Is the announced plan of the Ministry of Finance to equate bitcoin to foreign currencies a positive step?

SS: The fact that MinFin declared possible equation of bitcoin to foreign currency does suggest that the ministry can follow the European scenario. In this case, bitcoin exchange will take place under a banking license. This is what Europeans are mostly coming to.

Today it is a big problem to buy and sell bitcoins in Russia. There are not too many ways to do it quickly and without complications. The Central Bank’s instructions stating it undesirable for legal entities to work with bitcoin resulted in that, for instance, Killfishbar stopped accepting bitcoins and the exchange offices working legally started sinking one after another.

From now on, more options will probably appear for buying and selling bitcoins, because some legal entities will be able to do it lawfully and some real competition will finally emerge.

Questions still remain concerning the enforcement of this legislative initiative, be it approved. According to its last version, mining will be prohibited. However, largescale miners were never very public, and it would be tricky to detect who mines and who does not.

It may happen that everyone is mining, but for the regulators this information will be unavailable.

As for individuals engaged in mining, it will be just another enactment to arraign people on criminal charges. It is unlikely to become a regular practice. The ban on mining is an absolutely stupid initiative. It will hardly be used often, but rather will be a repressive measure for the law enforcement to prosecute particular people.

CF: But is it possible to ban cryptocurrencies at all or it is a supranational phenomenon?

SS: You can ban anything. The enforcement of the ban is the issue. It can be done, but in this case it will be necessary to reduce the Internet to whitelists, which would include both sites allowed to visit and traffic allowed to share, as well as a total ban on encrypted anonymised traffic. But it will not be the Internet anymore.

If it is possible to transfer encrypted traffic in Russia, which is, in fact, the basic principle of the Internet, there is no way bitcoins can be banned.

So far, as a result of the Central Bank’s requirements, legal entities in Russia would not be able to work with bitcoin legally, while selling drugs for bitcoins would not be a problem as it is not now. In this case, any ban will only penalise law-abiding citizens and companies.

CF: How appropriate is it to see bitcoin as a by-product?

SS: This is a chicken-and-egg problem and there are various points of view. It is a difficult question, only time will tell. Bitcoin is so far the most popular system where blockchain works.

I am sure that in five years the total capitalisation of other systems operating on blockchain will exceed bitcoin. This is already happening: various payment systems integrate blockchain because it is cheaper and more convenient. So far, saying blockchain we mean bitcoin. But in five years, bitcoin will be just one of the early realisations of the blockchain. They will not be synonymous anymore, as they are now.

CF: As far as we know, it was due to RosKomSvoboda that cryptocurrencies made their way to the draft election programme of the Yabloko party. How come?

SS: As part of the digital space development in Russia, this is one of the problems that can set the clock back for our country if we do not deal with it now.

Otherwise, all those who achieve success will emigrate to the West in no time at all where their projects will be in demand.

We had several meetings with representatives of Yabloko. They suggested us to make proposals and add them to the technological part of their programme, in particular, with regard to cryptocurrencies, freedom of speech, extremism and copyright. We submitted our proposals which were partly accepted.

Their programme draft raises the issue of bitcoin legalisation: not just regulation, but the absence of repressive regulation and enactment of laws allowing both individuals and legal entities to use bitcoins legally. This raises the question what kind of laws would be good for bitcoin.

The answer is twofold: depending on what side of the market you represent. From the point of view of taxation, it is beneficial for bitcoin to be a currency, while for others it is beneficial to have it as a commodity. It is one thing if I am an exchanger, another thing if I am a miner, the third thing if I am an individual who seeks to buy a house with bitcoins.

Elena Platonova