Russia Legalizes Bitcoin and Cryptocurrency Mining
Amid sanctions imposed by the United States that have restricted Russia's access to the SWIFT interbank messaging system, Russian President Vladimir Putin has signed a new law aimed at reducing the country's dependence on the US dollar in global trade.
Set to be enforced in November 2024, this legislation permits authorized mining companies to register within a state-managed database to engage in cryptocurrency mining. Additionally, smaller, individual miners will be allowed to mine digital currencies without formal registration, provided their energy usage remains below a specified threshold.
The oversight of Russia's newly sanctioned mining industry will be jointly managed by the Bank of Russia, the Ministry of Finance, and a selected group of cabinet ministers. These entities are expected to define more detailed regulatory standards in the upcoming months. Moreover, the legislation introduces a prohibition on widespread cryptocurrency advertising within Russia.
BRICS and Efforts Toward De-Dollarization
The BRICS alliance, consisting of Brazil, Russia, India, China, and South Africa, represents a coalition of emerging economies that are increasingly striving to reduce their reliance on the US dollar for international transactions.
The concept of an alternative digital currency for BRICS was first proposed during the 11th annual BRICS Summit in 2019. While the idea has attracted considerable attention, it faces significant challenges, including differing perspectives among leading member states regarding the structure of a unified currency.
In 2023, Russia renewed its efforts to develop a unified BRICS currency. State Duma Deputy Chairman Alexander Babakov mentioned that key members of the bloc were actively working on creating a new currency intended for international trade settlements.
Following Babakov's remarks, the Bank of Russia and the Russian government disclosed plans to establish specialized entities tasked with utilizing digital assets for cross-border transactions.
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Criticisms of the BRICS Currency Ambitions
Macroeconomist Lyn Alden expressed skepticism about the potential of a gold-backed BRICS currency to displace the US dollar. In a statement to Cointelegraph, Alden highlighted the historical issue where gold-backed paper currencies often result in the issuance of more paper claims than the actual gold reserves, leading to monetary debasement and potentially the currency's eventual collapse.
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