Key Takeaways
- During an investment conference held by the VTB Bank, Russian President Vladimir Putin questioned the need for global governments to store their reserves in foreign currencies as they risk being seized for poltical reasons.
- Ever since it invaded Ukraine, Russia has been heavily sanctioned by the U.S. and its Western allies, freezing $300 billion worth of its foreign reserves, a majority of which includes windfall energy revenues.
- Putin lauded the inability of global governments to prohibit Bitcoin and has urged Russia’s allies, the BRICS bloc, to develop advanced cross-border payment systems that could replace the dollar-dominated SWIFT interbank communication system.
- The Russian parliament recently passed a bill exempting Bitcoin miners and cryptocurrency transactions from value-added tax (VAT). Kremlin is also preparing to launch its digital ruble CBDC in the summer of 2025.
Russian President Vladimir Putin has questioned the need for world governments to hold their state reserves in foreign currencies, particularly the U.S. dollar or British pound, as they could easily be confiscated for political reasons. While he encouraged the prospect of investing such reserves in local currencies, he suggested that Bitcoin could be a better alternative as it cannot be controlled by a central authority.
Vladimir Putin Recommends Bitcoin For Storing Government Reserves
His remarks came during an investment conference organized by VTB Bank on Wednesday, where he asked why the government should accumulate foreign currency reserves if they can be lost so easily.
The comment is also a nod to the Kremlin’s strife with the Western governments since the start of the Ukraine war in 2022. Since then, the U.S. and its allies have frozen about $300 billion worth of Russia’s foreign reserves, mainly accumulated from windfall energy revenues.
Until 2022, Russia was the largest exporter of crude oil, after Saudi Arabia, exporting approximately $133 billion worth of crude petroleum. The country is also recognized as the largest exporter of refined petroleum products.
Discussions are being held among G7 countries on how these confiscated funds could be used to support Ukraine. In October, the UK provided Kyiv with a $3 billion loan using profits from frozen Russian assets.
Putin noted that the Biden administration was undermining the role of the U.S. dollar as the global reserve currency by using it for political purposes, which he says is forcing many countries to turn towards alternative assets, such as gold and crypto assets.
“For example, Bitcoin, who can prohibit it? No one,” Putin added.
Putin Urges Russian Allies To Develop Electronic Payment Systems To Rival USD-Dominated SWIFT
Apart from the flagship cryptocurrency, the President also touted new electronic payment technologies as another option, due to their lower costs and reliability. In October, he called for the BRICS nations – a bloc that includes Russia, China, India, and Brazil alongside developing economies – to create an alternative payment system, given that Moscow was booted from the USD-dominated SWIFT global interbank financial messaging system.
As Western sanctions started to pile up and cause economic hardships in Russia, the government started embracing digital assets, marking a significant change in its previous anti-crypto stance.
Russia, which proposed a blanket ban on crypto in 2022, now allows digital currency payments and is preparing to release the digital rubble, a central bank-issued digital currency (CBDC), in 2025.
Putin’s comments come following the enactment of a new law that creates a legal tax framework for crypto miners and transactions. This legislation will provide tax relief for transactions conducted through electronic payment systems and gives an exemption to crypto mining activities and token sales from value-added tax (VAT).
According to a report by the Moscow Times, Russia expects to earn $2 billion a year from crypto miners.
Putin’s endorsement of Bitcoin and his call for the adoption of new financial technology is in contrast with the U.S. President-elect Donald Trump’s proposal to create a strategic national Bitcoin reserve to back the dollar.
The incoming administration’s pro-crypto stance is expected to result in the introduction of a more friendlier regulatory environment for the digital asset industry. America’s stance on the market will definitely push other countries to adopt a progressive approach toward the technology.
Bitcoin Peaks At $104,000 As Trump Forms Pro-Crypto Administration
On December 4, Bitcoin broke past the $100,000 valuation for the first time in its history. The flagship cryptocurrency has witnessed its price rise 126% in 2024, going from $40,000 at the start of the year to a new all-time high of $104,000.
The bull run can be attributed to the successful launch of spot Bitcoin ETFs in January, the halving event that reduced its supply in April, and Trump’s backing of the industry and his subsequent victory in November.
On December 4, Trump nominated former SEC commissioner and pro-crypto advocate Paul Atkins to succeed Biden-appointed Gary Gensler as the chairman of the Securities and Exchange Commission (SEC), pointing fingers at a more accommodative regulatory environment for cryptocurrencies.
At the time of writing, Bitcoin (BTC) is trading at $102,000 – up 5.62% in the last 24 hours.
Also Read: Pro-Crypto lawyer Paul Atkins Nominated as SEC Chair by President Donald Trump
