Russian President Vladimir Putin addressed the issue of digital currencies during his annual Q&A this week by stating that the country cannot have its own crypto-currency.
Citizens, however, have a different take on things and are finding ways to use cryptos to their advantage.
During the session Putin spoke specifically about crypto-currencies. “Russia cannot have its crypto-currency inherently, just like no other can have its crypto-currency,” said the Russian president. “This is because when we are talking about crypto-currency, this is what goes beyond national borders,” according to the Russian News Agency.
He added that digital currencies should not be the means for saving or payments as they are not secured to anything. The Central Bank therefore will treat them cautiously, as constraining a crypto-currency to a single nation is virtually impossible. This latest stance goes against previous reports that Russia was indeed developing its own national crypto-currency.
However, according to CNN, farmers in the village community of Kolionovo, 125 kilometers outside Moscow, are dropping the ruble in favor of a digital token called Kolion to pay for local trade. Farmers have been facing growing problems with banks that want to charge them as much as 12% interest for small business loans.
The CNN story focuses on banker-turned-farmer Mikhail Shlyapnikov, who invented the Kolion as a promissory note back in 2014 that was intended to circumnavigate rural Russia’s slow-moving and expensive banking system.
The Kolion was originally a paper currency but the Russian courts banned it in 2015. Shlyapnikov then went digital with an initial coin offering in April 2017, which raised $500,000 for the project.
The Kolion differs to Bitcoin in that it cannot be mined with computer hardware but purchased with other crypto-currencies or ‘ploughed’ by helping the residents of the village with farming or construction work. Shlyapnikov, who calls himself an ‘agro-anarchist,’ has persuaded a hundred or so local farmers and suppliers to use Kolions for trade, making paper money a rare commodity within the community. According to the Moscow Times in 2016, one Kolion was pegged to 10 kilograms of potatoes and two Kolions were pegged to the equivalent to 10 eggs.
This Kolion is being seen by crypto advocates as one example of how digital currencies can offer a path to financial independence for many citizens, despite the cautionary approach by their government. Small enterprises and communities can function and thrive using their own forms of digital money that are partially protected from corrupt or inefficient banking systems or regimes.
The currency is now worth about $2 million since prices have climbed following the ICO and, according to Shlyapnikov, it’s backed by a reserve of 500 Bitcoins – about $3.8 million at today’s prices. It’s growth in popularity comes at a time that increasing numbers of Russians are looking for ways to insulate themselves from the financial system which has been hit hard in recent years by western sanctions and falling oil prices.
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