The technology behind crypto-currencies is expanding globally, and the implications of this on the Russian financial markets are significant. Since the Bitcoin cryptocurrency was released, the cryptocurrency Bitcoin has had an impact on the agriculture business. In what was seen as a historical move, Russia’s Finance Ministry announced in their financial strategy that they might be legalizing crypto-currency transactions for international supply chains. It will allow the use of crypto-currencies in the following ways:
1) To purchase goods and services from foreign suppliers, and any transactions will not be subject to taxation or monetary control.
2) Cryptocurrencies are being allowed as payment for foreign goods and services purchased in Russia, thereby avoiding the existing barriers imposed by traditional payment systems such as SWIFT and Visa/MasterCard.
3) Crypto-currency operators can register with the Central Bank as a particular bank, offering foreign currency exchange services.
4) Crypto-currency operators will not be subject to licensing or registration with the Central Bank.
The legalization also allows Russian citizens to legally invest in Bitcoin and other cryptocurrencies, making Russia the first country to announce such regulation. However, the most notable effect of this new law will be the removal of barriers faced by global supply chains operating in Russia, which are hugely important for its economy.
Why the Law Matters:
This law will allow companies to efficiently conduct their international business with little or no tax obligations or financial controls imposed on them by foreign governments. In addition, the savings and time gained by not going through the often stressful, time-consuming and aggravating process of being taxed will likely benefit many companies in Russia that are just now beginning to adopt blockchain technology.
The framework of the law is laid out in the Russian finance ministry’s document on the status of crypto-currencies:
It is important to note that this new law does not address crypto-currency mining operations or other computer-based activities.
How will it Affect Companies:
This change will make life much easier for companies that do supply chains internationally with Russia as a customer. Users will no longer impose regulatory barriers between themselves, their suppliers, or the final consumer. It will allow a greater degree of global business and a more remarkable ability to compete in the global marketplace.
This change will matter even more for companies that do not have Russia as a customer. Now that Russia is making crypto-currency transactions legal for international trade, it makes sense for companies to start looking at cryptos as an alternative payment method. The only hurdle is getting Russia as a customer, but I think that will be easier once they legalize mining operations. Of course, the most considerable risk in all this is that it may simply be too good to be true, and the Russian government will blow the whole thing up.
Many companies who might benefit from this will probably look to add crypto as an option for transactions anyway since there is so much value being grown in this market right now. In addition, this new law could give more legitimacy to crypto-currencies and make them a more attractive payment option for large companies worldwide. Russian suppliers may also benefit by getting paid in crypto instead of just cash if they choose. And the whole process seems to be moving along very well with this announcement, so it looks like the Russian government is serious about investigating how they should best use this new market.
What advantages can the Russian government get from bitcoin?
The benefits of this new law for the government do not stop with the companies that will be able to benefit from this. The government can now use revenue generated from the legalization of crypto-currency transactions to fund new projects and open new sources of tax revenue.
The precise wording in the finance ministry document indicates that companies will not be taxed on crypto-currencies or have any financial controls placed on them for doing business with Russia, which was one of their reasons for opposing bitcoin. This legislation may have been planned to get around bitcoin, but now it looks like it is a helpful piece of work that makes it easier for companies involved in supply chains to conduct their business. The government may also benefit from tax revenue generated from crypto-currencies exchanges for other fiat currencies. In addition, the Central Bank may have exchanged information about the crypto-currency industry with their counterparts in other countries, which could help them get a clearer picture of what is happening in this new market.
How will it Affect Normal Citizens?
The new law will allow citizens and Russian companies who want to invest or trade in crypto-currencies without any regulatory barriers imposed on them by their government. As a result, the prospects of legally investing in bitcoin and other cryptocurrencies are enormous, especially if you look at it as an investment opportunity.
