Russia, Venezuela, eying Blockchain technology to evade economic sanctions

; Date: January 4, 2018

Tags: Blockchain »»»» Monetary System »»»» Currencies

Certain countries, like Russia and Venezuela, are under economic sanctions over actions the so-called World Community deem to be crimes, such as Russia's take-over of Crimea. Such countries would of course be looking for ways to escape the sanctions so they can act freely. According to an NY Times report, both Russia and Venezuela are looking at creating government-backed cryptocurrencies that can be used for international financial transactions outside the normal financial system. They're clearly not planning to adopt an existing cryptocurrency, but to set up government-controlled currencies that just happen to operate over the Internet and use cryptographic controls.

Cryptocurrency (Bitcoin, Ethereum, etc) proponents have been pursuing a libertarian-paradise dream of a completely open currency outside government control that is safer than so-called fiat currencies. Regular currencies have designed-in periodic economic crashes, built into the core design of the currencies, and cryptocurrencies are free from such problems. But ... will Governments allow such activities to become significant and take over the actual economy? Most likely not, and the most likely result is for Big Corporate and Big Government institutions to adopt blockchain/cryptocurrency technologies while outlawing the existing currencies.

According to the NY Times, both Russia and Venezuela are looking to create cryptocurrencies as "a new kind of money and financial infrastructure, outside the control of any central authority, particularly the United States." Both countries are under economic sanctions which currently limit their freedom to make deals and move money through international markets.

And, it's not just those two countries:

In Venezuela the idea came directly from President Nicolás Maduro, with a plan to create a homegrown digital currency known as the Petro that will be backed by Venezuela's oil and natural resources. Venezuela has one of the worlds largest oil reserves and could be immensely rich ... but for some reason I'm not aware of, that country is under some economic sanctions.

In Russia, "officials under Vladimir Putin" are floating the idea of a so-called "crypto ruble." Given the tight control Putin has over things, especially currency things, any such idea would have to be under his approval.

These things taken together demonstrate one of the claims in the NY Times article. On the one hand both Venezuela and Russia are prohibiting its citizens from using existing cryptocurrencies like Bitcoin, but both are looking to embrace some kind of cryptocurrency.

It's predicted that the nature of cryptocurrencies mean government-backed efforts won't produce the results expected by the governments. That's because "virtual currencies are decentralized systems with no one in charge", but governments being governments they'll try to design their digital currencies to maintain governmental control.

In a blockchain system, transactions are conducted without passing through a central bank.

That's what makes cryptocurrencies attractive for avoiding economic sanctions. Those sanctions are implemented with rules installed in the banking system.

In Venezuela, the government has created an Office of Cryptocurrency Superintendent to oversee cryptocurrency research and implementation. Petro's, the units issued by the planned cryptocurrency, will be backed by the Venezuela governments "natural resources" (a.k.a. crude oil).

( press-center press-releases Pages jl236.aspx In 2014 the US Treasury said were not seeing, at that time, widespread efforts to circumvent sanctions through cryptocurrencies.

Source: ( 2018 01 03 technology russia-venezuela-virtual-currencies.html

About the Author(s)

David Herron : David Herron is a writer and software engineer focusing on the wise use of technology. He is especially interested in clean energy technologies like solar power, wind power, and electric cars. David worked for nearly 30 years in Silicon Valley on software ranging from electronic mail systems, to video streaming, to the Java programming language, and has published several books on Node.js programming and electric vehicles.