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"In a number of countries, cryptocurrencies are becoming or have already become a full-fledged means of payment, as well as a means of investment. Cryptocurrencies usage, at the same time, bears significant risks, I'm aware of the [Russian] Central Bank's position," Putin said on Tuesday.
Putin warned that the risks include, "first of all, opportunities to launder funds acquired through criminal activities, tax evasion, even terrorism financing, as well as the spread of fraud schemes."
The other issue related to the cryptocurrencies is the lack of transparency or any monetary standard. As the cryptocurrencies "are issued by an unlimited number of anonymous sources," in case of any problems, including "system malfunctions" or emerge of currency bubbles, there will be no one liable, Putin warned.
Top Russian officials have been recently discussing measures to fix the legal limbo surrounding cryptocurrencies, ranging from introducing a regulation of sorts to imposing an outright ban on the token-based electronic currencies.
Russia's lower house has been discussing a bill to regulate the cryptocurrency trade, while the Chairman of the State Duma Committee on Financial Markets Anatoly Aksakov suggested a pilot program of bitcoin trading on Russian markets.
The Finance Minister, however, sees the cryptocurrency market as an extremely volatile pyramid-like structure, and seeks to protect the public. Russia's Central bank takes a similar view.
Russia to regulate bitcoin & other cryptocurrencies
Wed, 11 Oct 2017
The Russian government has decided to officially regulate the mining and circulation of cryptocurrencies. The decision was made at a meeting between President Vladimir Putin with officials and business leaders.
"We have seen how bitcoin has transformed from a payment unit into an asset, which is bought in order to obtain a high yield in a short period of time. This is the definition of a pyramid," First Deputy Governor of the Bank of Russia Sergey Shvetsov said.
"We have agreed on the following: the state should regulate the process of issuing cryptocurrencies, the process of mining, the process of circulation," said Finance Minister Anton Siluanov on Wednesday.
"The state should head this situation and regulate it legally," the finance minister said, adding that he was not yet ready to disclose the details.
The meeting was held on Tuesday and was attended by Siluanov, Central Bank Governor Elvira Nabiullina, the CEO of the Qiwi payment system Sergey Solonin and others.
At the meeting, Putin stressed that the state should regulate cryptocurrencies, but not create barriers for investors.
"We need, based on international experience, to build a regulatory environment that will systematize relations in this area, to protect, of course, the interests of citizens, business, and the state, to provide legal guarantees for working with innovative financial instruments," he said.
However, Putin said digital money lacks transparency. As the cryptocurrencies "are issued by an unlimited number of anonymous sources," in case of any problems, including "system malfunctions" or the emergence of currency bubbles, there will be no one liable, warned the president.
Comment: Seems Putin's warnings were preparing the ground for the introduction of the regulation over cryptocurrencies. This is a new step for Russia and for the world of cryptocurrencies.
It's also worth noting that while cyrptocurencies are highly volatile, users can be found by law enforcement, same as any currency transaction. See the following video for more detailed analysis: