The president of the Russian central bank, Elvira Nabioullina, has recently come under scrutiny for her stance on bitcoin. While the European Central Bank continues to take a harsh stance towards the cryptocurrency, the Russian central bank is not far behind. Nabioullina has proposed to reserve bitcoin for the wealthiest individuals, in a move that has drawn ridicule from many.
The Moscow Times has reported that the Russian central bank is making international payments in bitcoins to circumvent the Western financial embargo. This move highlights the value of bitcoin as an ally in times of international tensions. However, these BTC payments are only open to banks, insurance companies, and investment funds, with individuals needing an annual income exceeding million rubles to benefit from it.
Despite this experimental system, buying bitcoins is not prohibited in Russia. However, businesses are not allowed to accept it as payment. Nabioullina’s preference for Central Bank Digital Currency (CBDC) over bitcoin reflects a broader distrust of the cryptocurrency. This contrasts with the opinion of Russian President Vladimir Putin, who has stated that no one can ban bitcoin and that new technologies will continue to develop.
The debate over bitcoin’s potential to replace traditional payment systems like Visa and Mastercard is ongoing. While the Lightning Network offers lower transaction fees, the scalability issues and the limit of MB per block make it difficult for bitcoin to compete with traditional payment systems. Additionally, the fixed money supply of bitcoin makes it challenging to finance large projects, as creating money ex nihilo is essential for complex societies.
In conclusion, central banks have little to fear from bitcoin. Its limitations in transaction throughput and fixed money supply prevent it from replacing traditional payment systems and banks. While bitcoin may have its advantages, it is unlikely to replace fiat currency in the near future. The debate over the role of bitcoin in the financial system continues, but for now, it remains a marginal payment currency.