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Legalization of Bitcoin: current status and future of the cryptocurrency in Belarus

Brief overview of the history, international status of Bitcoin and its present state within the country, risks related to the use of cryptocurrency, the opinion of the authorities and experts

The information about the virtual currency Bitcoin is quite often appears in the Belarusian press. It was created in 2009, gained considerable popularity abroad and rose in price a hundred times just in two years. Emission of this digital currency is limited to 21 million coins, about 12 million of which are already produced, while the amout of the coins in circulationis throughout the world is estimated at least at $ 11 billion. Experts call bitcoin “the money for the people with good imagination”, because its cost doesn’t depend on any currency or other assets and it’s based only on the trust. The cryptocurrency rate is determined solely by supply and demand balance. Moreover, the amount of complex mathematical calculations, that generates the money on computer, is considered to be the ensuring of virtual money. The holders of Bitcoins use cryptocurrency for electronic payments, goods and services of the sellers, who is able to accept it, and also exchange the virtual coins for conventional money, using specialized platforms for trading or exchangers.

The appearence of a practically new monetary system, that doesn’t have a distinct emission center and legislative framework caused the well-founded concerns on the part of financial regulators of many countries. In particular, the central banks of Russia, France, China, India, Thailand came up against the using of Bitcoins. For example, the Central Bank of Russia called such operations doubtful, and noticed that virtual currency has no cash security and legal ground, operations with it are of a speculative nature, carried out on the so-called virtual exchanges and have a high risk of cost loss. People can be involed, sometimes unintentionally, into the illegal activities, including the legalization (laundering) of the proceeds from crime and financing of terrorism, because of anonymous nature of the activities for the production of virtual currency.

 

In Belarus

National Bank of the Republic of Belarus confirms this information.  Deputy Chairman of the National Bank Sergei Dubkov recalls, that, taking into account the rules of Articles 14, 232, 274 of the Banking Code, monetary operations on the territory of Belarus may be made in cash and non-cash, using Belarusian rubles, foreign currency, electronic money, only in the manner prescribed by law. “Virtual currency Bitcoin has no legal grounds for the use on the territory of Belarus, respectively, using it for payments creates legal risks for businesses and individuals, as well as risks associated with the lack of adequate guarantees of repayment obligations – emphasizes Sergei Dubkov. – Organizations and individuals should consider these factors choosing a means of payment in Internet and take into consideration the norms of the legislation of Belarus.”

The Ministry of Internal Affairs of the Republic of Belarus also recommends to refrain from trading in Bitcoins, noting that citizens, involved in the operations of the so-called cryptocurrency, can become not only the victims of unlawful attacks, but unwitting participants of questionable transactions in legalization of income obtained by illegal means. The Investigative Committee, in its turn, stressed that the approach to the phenomenon of Bitcoins should  be very balanced and this phenomenon requires careful exploration.

 

In the world

The officials in the United States, Canada, Germany, UK are more loyal to Bitcoins.  For example, in Vancouver, Canada the first cash machine was opened, where anyone can exchange money for usual cryptocurrency or, conversely, to sell his Bitcoins, exchange them for cash. In March, 2013, The US Financial Crimes Enforcement Network (FinCEN) issued an instruction in which the system of virtual currency, in fact, was equated to the usual payment systems. The Ministry of Finance of Germany, in its turn, in the summer of 2013 reported that it recognizes Bitcoin as a unit of mutual settlements.

In general, the representatives of the banking and financial communities differ in their assessments regarding cryptocurrency. Some of them call Bitcoin the present trend and predict high growth of its value in the future. They compare the present phase of existence of this cryptocurrency with the Internet in 1993 and personal computers in 1975. The others believe that digital currency is like a soap bubble, they note that Bitcoins have no real value. However, many experts agree that the project requires a thorough study in order to understand its true significance. The head of the Bank of Japan Haruhiko Kuroda reported that the banking Institute of monetary and economic research is studying Bitcoins. The head of Savings bank of Russia German Gref said at the World Economic Forum in Davos: “Сryptocurrency – it is a very interesting international experiment that breaks the paradigm of monetary emission. And they are definitely shouldn’t be banned, but we should try to understand, to study and, possibly, to start properly regulate it.”

 

What Belarusian experts say

A Belarusian analyst of the research group BusinessForecast.by, Alexander Mukha, in his turn, believes that the approaches of central banks to payment systems and virtual currencies should be unified. “The operations of payment systems should be transparent for regulators and tax authorities – he said. – Otherwise, the limitations for such payment systems are natural. Unfortunately, Bitcoin transactions are not clear, with involvement of criminal structures.”  “We need to realise that Bitcoin exchange transactions are highly risky”, the expert says. “In other words, there is a risk of losing money. Moreover, in terms of liquidity for traders, international financial markets are more suitable, including the stock market and international currency market FOREX”, – he adds.

Alexander Mukha believes that in the current situation, such  payment systems as MasterCard, VISA, electronic money (PayPal, WebMoney, EasyPay) and money transfer systems (Western Union) look more preferable option for further development in comparison with Bitcoins. “Finally, Bitcoin investment prospects also seem ambiguous. It is hardly possible that central banks will legalize the operations with virtual currency in the medium term. Conversely, we can expect that the authorities of some states will increase control over transactions with Bitcoins along with the strengthening of the fight against offshore companies, and it will provoke the fall of the virtual currency relatively to major foreign currencies. Therefore, the investments into Bitcoins, ultimately, are  not the best step for investment funds “, – the financial analyst considers.

 

Text by Anna Kot of Belta.by

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