đ Context:
- Following US sanctions that blocked Russia from the SWIFT interbank messaging system, Russia has moved to explore alternative forms of international trade settlement.
- President Vladimir Putin approved legislation aiming to reduce reliance on the US dollar in international trade.
đȘ Legalization of Crypto Mining:
- Effective Date: November 2024
- Mining Registration:
- Approved mining firms can register through a state database.
- Small, individual miners can operate without registration if energy consumption remains below a specific threshold.
- Oversight:
- The newly legalized mining industry will be overseen by the Bank of Russia, the Ministry of Finance, and a select cabinet of ministers.
- Precise regulatory requirements are expected to be developed in the coming months.
- Advertising Ban: The law introduces a ban on mass cryptocurrency advertising inside Russia.
đĄ BRICS & De-dollarization Efforts:
- BRICS Members: Brazil, Russia, India, China, South Africa.
- Goal:To diminish reliance on the US dollar for international trade.
- BRICS Currency:
- The idea of an alternative digital currency was first proposed at the 11th annual BRICS Summit in 2019.
- In 2023, Russia renewed its focus on developing a unified BRICS currency for international trade settlement.
- Challenges: Disagreements between member states on how a unified currency would function.
đ Criticisms & Challenges:
- Macroeconomist Lyn Alden's View:
- Skepticism: Alden doubts that a unified BRICS currency, even if backed by gold, could dethrone the US dollar.
- Monetary Debasement:The problem with gold-backed paper currencies is the tendency to issue more paper claims on gold than the actual reserves, leading to potential collapse.
đ Conclusion:
- Russia's move to legalize Bitcoin and cryptocurrency mining marks a significant step in its broader strategy to reduce reliance on the US dollar and embrace alternative financial systems.
- The development of a BRICS currency is an ambitious project, but it faces significant hurdles, including skepticism from economists and internal disagreements among member states.
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