Russia Proposes Jail Sentences for Buying Bitcoin with Cash

Mish

Russia seeks to crack down on Bitcoin purchases with huge fines and even jail sentences.

Bitcoin News discusses a Russia Proposal to Crackdown on Bitcoin. 

Details

  1. People face seven years in jail and fines of as much as $7,000 for utilizing BTC in monetary transactions.
  2. Penalties apply to buying crypto with cash or transferring to accounts opened with Russian banks.
  3. For corporations buying Bitcoin without approval from Russian central bank (there won't be any approvals), fines are as much as two million rubles or about $28,000.
  4. One of proposals is to fully cease digital property from being used at all. in transactions.
  5. People who already hold digital assets will be forced to register them with Russia’s tax agency and explain how they acquired them. 

What's It Mean Now?

  • Immediately, not much, outside of Russia. 
  • Those inside Russia will have to choose to violate the rules to transact in Bitcoin. 

What's in Mean in the Future?

  • This is another huge warning shot along the lines of what I suggested before. 
  • If China, the US, or the EU enacts similar legislation, the price of Bitcoin will crash.

Bitcoin Supporters Cannot Answer One Simple Question

I have discussed the issue at hand previously, most recently in Bitcoin Supporters Cannot Answer One Simple Question

What would happen to the price of Bitcoin if the US did not allow merchants and banks to make Bitcoin transactions?

That's a very simple question that I have been asking for months. My reason for asking is based on a simple premise:If central banks or governments are ever threatened by Bitcoin, they will destroy it.

Playground Responses

ReadBTC Bitcoin

That reads like a third-grader response "If you don't know, I'm not going to tell you".

Peer-to-Peer Unstoppable Silliness

Bitcoin Cash is a peer to peer cash System

Wonderful. 

People can barter with Bitcoin much the same way someone could trade eggs for shoes. Supposedly, that makes Bitcoin "unstoppable".

Under a transaction ban scenario that I have suggested, the government will allow you to keep your bitcoin, it just will not let let banks or stores deal with Bitcoin transactions.

You can send your bitcoins to whomever you want. But try getting US dollars or Euros in or out, in size without reporting it immediately.

Central Banks to the Forefront

Please consider ECB’s Weidmann Urges Euro-Area Banks to Battle Facebook’s Libra

European Central Bank policy maker Jens Weidmann, who heads Germany’s Bundesbank, has long called for caution over private-sector digital currencies and his comments echo concerns among officials from Europe to the U.S. over Libra, a planned digital token backed by multiple national currencies.

I’m not in favor of always immediately calling on the state” to come up with solutions, Weidmann said in an interview with German newspaper Handelsblatt published Thursday. “In a market economy, it’s up to companies to develop products that meet customer demands.”

Weidmann Translation

In case that was not obvious, I offer this proper translation: "I am immediately calling on the state to deal with the threat of cryptocurrencies".

Free Market Construct

For the record, I am against what Russia did, and am against regulation of Bitcoin in general. 

After all, Bitcoin is a free market construct. 

My warning is in regards to what I believe central banks and governments will do, not what they should do.

I have nothing against Bitcoin.

But under the guise of stopping money laundering and illegal activities such as porn or drugs, more crackdowns are coming. 

Russia clearly wants to crack down on capital flight and so does China but so far both have been feeble. 

When China, the EU, or the US decides to crackdown on Bitcoin with a heavy hand, we will find out just how much "peer to peer" bartering is worth. 

Here's a hint: not much.

Misunderstanding the Supply of Bitcoin and Gold Leads to Silly Projections

Bitcoin Supply Will Increase until 2140

The above chart from BitcoinWorldwide.

Also, please consider Misunderstanding the Supply of Bitcoin and Gold Leads to Silly Projections.

Bitcoin proponents will tell you the supply of Bitcoin is falling. Bitcoin did recently "halve", that is the amount of Bitcoin one received for successfully mining block just fell in half.

However, supply, not counting lost bitcoin wallets, will continue to rise every day until 2140 when the last Bitcoin will be mined.

Anyone who tells you the supply of Bitcoin is falling does not understand supply. The rate of new supply is falling but total supply is rising.

Primary Warning

To return to the main point, "If central banks or governments are ever threatened by Bitcoin, they will destroy it."

The process has started. Warnings are in place from Russia, the ECB, and central banks in general.

Central Bank Digital Currencies On the Way

On May 20, 2020 I commented Central Bank Digital Currencies On the Way

Six countries have digital currency pilot programs in place. Canada is in development mode while the US lags.

Act of Faith

Believe what you want, and you will, if you are a true believer because Bitcoin is Now an Act of Faith impervious to logical flaws.

OK proponents, in light of the new warnings, have another shot at the key idea: Bitcoin Supporters Cannot Answer One Simple Question

See if you can do better this time than peer-to-peer bartering. 

Mish

Comments (22)
No. 1-9
Sechel
Sechel

It's huge that nations mandate paying taxes in local currency. it creates a market.

I've been wrong on bitcoin since day one. in my mind the value should be zero

Montana33
Montana33

I have always wondered why governments allow it? The US puts huge requirements on banks to know their customers and stop money-laundering. Why allow bitcoin then?

Carl_R
Carl_R

What will governments do about gold? They have been known to confiscate it before.

CCR
CCR

Central Banks should just purchase crypto.... oh wait, that would be illegal

guidoamm
guidoamm

Mish,

Are there any states in the USA where individuals can donate or barter items that have a property title attached to it?

In Italy for example, one could not donate a car or a house to a next of kin. The state will not accept a donation or a swap without imposing a transaction value on it.

WebSurfinMurf
WebSurfinMurf

Mish, Do you have any different opinion for owning physical gold? Meaning, couldn't the same governments forbid buying gold with cash or using it for barter? If not, why can't they vs Bitcoin? Thanks!

Crypto Enthusiast
Crypto Enthusiast

There can be no denial that short term price volatility can be hampered by regulatory burden, as is the case with any other industry. If you ban something, of course there are price implications. Bitcoin, and other cryptocurrencies existence is not in threat, and can never be destroyed at this point. China banned bitcoin and the price crashed, then subsuqeuntly rebounded within months then reached all time highs.

How do you account for risk management, when government's practice populist narratives that become legal framework?

The cryptocurrency, blockchain industry is slowly extending its tentacles into various financial and non financial industries. If this trend continues an outright ban would could be quite detrimental. One can only hope bitcoin doesn't balloon to 200k in a short timeframe. This ballooning of value outside the control of central bank / government influence would raise red flags and attract much unwanted and unneeded attention to the industry.

It is entirely possible, that governments under the guise of money laundering etc would ban its use.

The question comes down to, do you trust central banks, and governments with the fruits of your labor? Do you trust central banks, and governments will make monetary decisions based on the interests of individuals and citizens, in your best interest? Or do they have influence from special interests? Do they have interest in financing endless war and social spending? Or do you trust a decentralized, trust-less, system where the supply is finite, and predictable with no central actors or authority? A system where your cash and bank account can be stored in your brain.

Technology is deflationary in nature. The end of the traditional financial system has already been validated at this point. Banks and the traditional financial system serve no purpose anymore. They will stay in place because of power structures, it's only a matter of, if and for how long. Everything the traditional system charges thousands for can be done for pennies on decentralized system. It is the nuclear bomb the financial industry should fear.

Manuelgar
Manuelgar

At this point where Bitcoin is being traded at CME and the CFTC has approved financial instruments with Bitcoin as underlying asset, it would be strange that the government bans Bitcoin. However, if the US government bans Bitcoin, it would happen what always happens when something is banned: black markets would appear.

I don't think the US government would ever ban bitcoin if it is irrelevant and not a real threat, that is, if it is not useful for the purpose it was designed (i.e. value preservation and censorship resistance). So the fact that the US government bans bitcoin would be a symptom of Bitcoin's success and utility, therefore it is safe to say that there would be people interested in buying it in black markets.

Probably, people that don't want to be involved in black markets would sell, which could cause an initial price crash. But after that crash, the market would be mainly hodlers not willing to sell nor move around their bitcoins very much, and a small fraction of black market operators that would be willing to sell, so the supply would probably be thin. The ban of bitcoin should objectively trigger more Bitcoin demand as the ban itself proves the necessity of Bitcoin, but at the same that demand would be severely diminished because most people don't want to be involved in illegal things.

However, if the US government does not offer or does not allow for a reasonable alternative for value preservation, more and more people will have incentives to break the law, and black markets would become more sophisticated so it becomes easier to break the law without the government noticing.

FromBrussels
FromBrussels

Common sense from Russia.....again... Isn t the financial system enough of a decrepit madhouse already, even without imaginary currencies ??


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