FOCUS: Analysts say Russia unlikely to copy Venezuelan petro, needs laws first
By Yekaterina Yezhova
MOSCOW, Mar 5 (PRIME) -- Russia will hardly follow Venezuela’s suit in issuing a cryptocurrency backed by any natural resource, because raising debt via bonds is preferable, analysts say.
“Moscow should first decide on the status of a cryptocurrency in general, as ignoring the issue won’t work anymore. Talks about creation of a cryptoruble have been going on for long,” Alexei Pikuza, director of the alternative investments department at investment company Veles Capital, told PRIME.
“Its appearance would help the government control a legal transfer of investors from the ruble to crypto assets and vice versa, including registering and charging the taxes. Backing such a cryptocurrency by a real asset could be an extra advantage, but not the key one.”
Venezuela launched its oil-backed cryptocurrency, called the petro, in late February and President Nicolas Maduro said that preliminary sales reached U.S. $735 million. Each petro is pegged to the price of one barrel of Venezuelan oil.
The South American country suffers from galloping inflation, a collapse of its national currency, the bolivar, and shortages of food and other staple goods.
Bogdan Zvarich, a senior analyst at investment company Freedom Finance, said Venezuela is experiencing severe difficulties with external borrowing due to Western sanctions and economic turbulence and is looking for unusual channels of raising money.
“Russia does not have any problems with borrowing at present. First, we do not need so much. Second, the situation favors bonds. Investors like our bonds, which translates into good demand at placement and on the secondary market,” the analyst said.
“Besides, I am not sure that cryptocurrencies backed by energy resources will be popular. I’d say they are a highly speculative tool. A very strong increase in hydrocarbon prices that would meet requests of investors in cryptocurrencies looks extremely improbable at the moment.”
Roman Tkachuk, a senior analyst at investment company Alpari, also thinks Russia should not follow Venezuela’s example.
Venezuela has not been the first to issue a cryptocurrency backed by real assets. Examples of offering such digital money supported by gold, oil or diamonds, are in abundance, but they are not popular among crypto investors, Pikuza at Veles Capital said.
Russia should first elaborate advanced and clear legislation for regulation of cryptocurrencies, which will be the main step.
“The question is not in backing the cryptoruble by real assets, but in its acknowledgement by people, investors, including foreign ones, as a means of payment. The question is in trust in such a currency, if you like. To declare backing of a cryptocurrency by assets and to ensure receipt of an asset for a cryptocurrency are completely different things,” Pikuza at Veles Capital said.
Tkachuk at Alpari is cautious about the idea of backing a cryptocurrency by oil or natural gas.
“The blockchain technology is a new field of economy and has nothing to do with classic commodities. Backing a cryptocurrency by such assets could attract more investors at the first stage, but the cryptocurrency itself is more important,” he told PRIME.
“Anyone can issue his own cryptocurrency. The other question is whether it will enjoy demand among investors or not. If a government launches a cryptocurrency, the move adds a certain status and some weight to the digital money, but does not necessarily attract investors.
“Russia may launch its own cryptocurrency already this year. A working group at the State Duma (the parliament’s lower house) has already elaborated a bill on the cryptoruble status. It is still unclear how the initiative will be implemented: whether it will be a cryptocurrency for settlements between Russian companies and partners from the Eurasian Economic Union or it will be offered to a wide circle of investors.”
Pikuza at Veles Capital said Russia still has obstacles for launching its own cryptocurrency, including the lack of a legal base, complicated elaboration of a high-tech project, and search for professionals to maintain its circulation.
“In order to launch a cryptocurrency successfully, we need a community within which this means of payment will exist, be recognized and function. The wider the community is the more successful the project is,” he said.