The 69 year old president of Russia’s Federation, Vladimir Putin, said it is too early to talk about the use of bitcoin or crypto in payments for commodity contracts.
Asked a leading question by Hadley Gamble of CNBC on whether a potential shift for contracts for the supply of oil away from dollars means crypto, “when do you think this can happen?” – Putin said:
“Cryptocurrency contracts? It’s too early to talk about this, because cryptocurrency, of course, can be a unit of account, but it is very unstable. In order to transfer funds from one place to another – yes, but to trade, let alone trade in energy resources, in my opinion, is still premature.
The cryptocurrency is not backed by anything yet. It exists and as a means of calculation can be used, of course, yes, but trading in oil, say, or other primary materials and energy sources – still, it seems to me, it’s too early to talk about this yet.
But everything develops, everything has the right to exist. We will see how it will go further, maybe someday it may also be a means of accumulation. We see this market fluctuate. It’s a bit early today.”
Some cryptos are backed, like Uniswap for example is backed by the revenue on its defi platform. There’s now XAUt, which is a gold backed crypto token in the style of USDt. But bitcoin is volatile, although that volatility so far has been in one direction.
It has the right to exist, Putin says, not that he has much choice in that, but where their government policy is concerned, Russia has also recently come out to say they won’t impose a China style banking blockade on cryptos.
“So you think that this does not mean anything, and people like Elon Musk, what they have, is all worthless?” – Gamble asked with Putin stating:
“Why then? It costs. Can it just be used as a unit of account when buying and selling oil? This is what I’m talking about.
And then, in order to emit, you need, you know about this, a huge amount of energy. To do this, you need to use, while using, traditional types, and above all hydrocarbons.”
This is Kremlin’s own translation, with Putin probably saying why then is it valuable, but he comes across as a bit of a bitcoin sceptic. He met Vitalik Buterin, ethereum’s co-founder, in 2017. We’re not aware of any further interactions since, so Buterin has presumably not updated him on Ethereum’s move to Proof of Stake which should address any environmental concerns.
Yet Putin doesn’t dismiss the use of crypto “to transfer funds from one place to another” or that “maybe someday it may also be a means of accumulation.”
But he does dismiss the suggestion of moving away from the dollar, stating “we are not interested in completely avoiding payments in dollars, and so far we are satisfied with, say, payments for energy resources in dollars, primarily for oil.”
For anything further, there may be a generational gap as cryptos are too new a way of doing things for someone in their seventies and when it comes to oil contracts, they are too new for even pioneers in this space, but they’ll be here soon if they aren’t already, although more as a synthetic.
So it may be for the new generation to ponder on how cryptos can more holistically be integrated with Putin asked whether he “wants to be President until you are 84?” He says:
“No, I prefer not to answer such questions, this is my traditional answer. There is still a lot of time before the next elections. Conversations on this topic are destabilizing the situation. The situation must be calm and stable so that all government bodies, all state structures work confidently and calmly look into the future. Yes, the Constitution allows me to do this, to run for the next term, but no decisions have been made on this score yet.”
He appears to have the right priority however with the President stating: “For us, the most important problem and the most important task that we must solve is raising the incomes of the country’s citizens.”
Innovation tends to be one way of doing so with data showing countries that invest most in research and development as proportion of their GDP tend to be the most wealthy.
On that front however Putin has exiled Pavel Durov, the founder of Telegram and a sufficiently skilled coder for us to nominate him as a potential candidate to be Satoshi Nakamoto.
Where cryptos are concerned we are not aware of any problems in Russia, but most, if not all, of the talent in this space comes from other tech fields and if some of that talent is exiled then you’re at a competitive disadvantage economically.
Something that extends to managing volatility when it comes to oil trading, either in more stable dollars or volatile bitcoin, which in defi can now probably be achieved in an experimental way by tokenizing or synthesising oil contracts that are then hedged with options as well as futures to neutralize or at least minimize risks, from volatility or other factors.
Zhu Su of Three Arrows Capital seems to think that’s “intergalactic moves… truly dynastic stuff.” Adding: “The oil plus gas to Bitcoin trade is the real macro convergence story.”
Studies have shown bitcoin responds to geopolitical risks and oil or gas tend to be one cause of geopolitical risks so you could potentially hedge them with bitcoin.
That’s something more for financiers and traders however than Putin as at a state level it would be more a matter of whether to buy or sell oil or commodities in crypto, something that at this stage might be happening, but at a very limited scale and only when there’s no other option because unless they’re piling on bitcoin, they’d want to buy or sell in their own printed money.
On that, “maybe someday it may also be a means of accumulation” is a slightly interesting comment because the Russian central bank has been piling on gold with the obvious question being: why not diversify at least a bit with bitcoin?