Last Thursday, Russian authorities got right to the point when they clearly and explicitly prohibited use of Bitcoin and other virtual currencies.
The statement was not too dissimilar from its earlier announcement 2 weeks ago, where they warned of the following: the speculative nature of virtual currency and that it carries a high risk of loss; it is not considered legal tender; the federal law stipulating that it is forbidden to issue “surrogate currencies”; dealing with the currency can bring an person to intentionally or unintentionally support criminal or terrorist activity; and individuals dealing in it may be suspected of such activity.
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The “cryptic” statement went so far as to dissuade Bitcoin use and effectively forbid it, without actually doing so. At that point, Bitcoin was not officially “illegal” anywhere. Many countries declared that it does not constitute legal tender, but nothing else. Even China stopped short of banning it outright, instead prohibiting financial institutions from dealing with it and imposing restrictions on how businesses and exchanges trade in it. Even these have become the subject of re-interpretation, every man according to his needs.
And for good reason: it is a tough thing to actually ban and enforce. Countries have not had enough time or conviction to introduce legislation against it from scratch, leaving them only with the choice of linking back to pre-existing laws. In so doing and by not considering it a real currency, it’s a tough sell to then go ahead and consider it another type of currency just for the sake of banning it. Banning it outright may also show a sign of weakness on the part of the government, exposing their unease of the threat posed by virtual currencies to their not-so-well-managed legal tender. And in more democratic places where people’s voices carry weight, such a ban is far from unanimous at best and will most likely provoke strong backlash from supporters.
Russia last Thursday sought to clear the air on virtual currencies: they are illegal. “Systems for anonymous payments and cyber currencies that have gained considerable circulation – including the most well-known, Bitcoin – are money substitutes and cannot be used by individuals or legal entities”, said the Russian Prosecutor General’s Office.
The “iterative” approach taken by Russsian authorities is not new in this regard, with an interesting sequence of mixed messages coming out with respect to exchanges like BTC-e facing prosecution.