Putin Endorses Bitcoin As He Questions The Need To Hold Government Reserves In Foreign Currencies

Russian President Vladimir Putin has questioned the need for world governments to hold their state reserves in foreign currencies, particularly the U.S. dollar or British pound, as they could easily be confiscated for political reasons. While he encouraged the prospect of investing such reserves in local currencies, he suggested that Bitcoin could be a better alternative as it cannot be controlled by a central authority.

His remarks came during an investment conference organized by VTB Bank on Wednesday, where he asked why the government should accumulate foreign currency reserves if they can be lost so easily.

The comment is also a nod to the Kremlin's strife with the Western governments since the start of the Ukraine war in 2022. Since then, the U.S. and its allies have frozen about 300 billion worth of Russia's foreign reserves, mainly accumulated from windfall energy revenues.

Until 2022, Russia was the largest exporter of crude oil, after Saudi Arabia, exporting approximately 133 billion worth of crude petroleum. The country is also recognized as the largest exporter of refined petroleum products.

Discussions are being held among G7 countries on how these confiscated funds could be used to support Ukraine. In October, the UK provided Kyiv with a 3 billion loan using profits from frozen Russian assets.

Putin noted that the Biden administration was undermining the role of the U.S. dollar as the global reserve currency by using it for political purposes, which he says is forcing many countries to turn towards alternative assets, such as gold and crypto assets.

"For example, Bitcoin, who can prohibit it? No one," Putin added.

Apart from the flagship cryptocurrency, the President also touted new electronic payment technologies as another option, due to their lower costs and reliability. In October, he called for the BRICS nations - a bloc that includes Russia, China, India, and Brazil alongside developing economies - to create an alternative payment system, given that Moscow was booted from the USD-dominated SWIFT global interbank financial messaging system.

As Western sanctions started to pile up and cause economic hardships in Russia, the government started embracing digital assets, marking a significant change in its previous anti-crypto stance.

Russia, which proposed a blanket ban on crypto in 2022, now allows digital currency payments and is preparing to release the digital rubble, a central bank-issued digital currency CBDC, in 2025.

Putin's comments come following the enactment of a new law that creates a legal tax framework for crypto miners and transactions. This legislation will provide tax relief for transactions conducted through electronic payment systems and gives an exemption to crypto mining activities and token sales from value-added tax VAT.