Dr. Victor Dostov is one of the leading experts and managers in Russian retail payment sectors. He has served as the President of the Russian Electronic Money Association since 2009.
Since 1999, Dr Dostov was a managing partner and one of the founders of the PayCash Group involved in technological engineering, project management, investment and consulting in retail payments. The PayCash Group launched such projects as Yandex.Money, Mobi.Dengi, iDealer, Beeline e-commerce, and many others. Victor was on the Board of the PayCash Group, Mobi.Dengi payment company, Director for new payment technologies in Tavrichesky Bank and other businesses.
Dr Dostov took part in regulatory consultations under the auspices of the Russian Central Bank, Infocommunication Union, Mobey Forum, GSMA and participated in devising regulations for the pre-paid cards and other pre-paid products. He consulted supervisory authorities in Russia and Ukraine as well.
He also takes part in the Consultative Council on AML/CFT matters, Multiagency Council on optimization of payments, Technical Committee “Mobile payments” of the Russian Central Bank, Expert Council on non-bank organizations, microfinancing and credit cooperation of the State Duma Committee on financial markets. Lastly, Dr Dostov is an active participant at conferences and roundtables on retail payments and is the author of multiple publications on the issues of retail financial services.
With such an extensive track record and experience in pioneering digital payments in Russia, CoinTelegraph could not pass up the opportunity to ask Victor some questions on Bitcoin in Russia and get his thoughts on the proposed legislation banning cryptocurrencies and all related information in the world’s biggest country.
CoinTelegraph: How does the Russian Electronic Money Association view cryptocurrencies?
Victor Dostov: Russian EMA represents the largest payment businesses in Russia. One of our duties as an industrial association is to study new payment technologies and increase awareness of the public about innovative ways to pay. And from this standpoint, I think that Bitcoin and its analogues represent a great new generation of digital cash invented back in the 1980-s by David Chaum.
This technology is certainly a breakthrough in payments. We do not think that cryptocurrencies and the existing payment methods (such as e-money or payments from prepaid mobile accounts) should necessarily compete. For our members and the Bitcoin community alike, creating products that would inherit the best of both worlds is the most preferable goal.
CT: We have heard the Central Bank’s statement on cryptocurrencies, but do the authorities acknowledge any of the blockchain technology’s benefits?
VD: Unfortunately, at this moment we have not heard any clear acknowledgement of the technology’s benefits from the authorities. Representatives of some large Russian banks (including state-owned) expressed their interest in cryptocurrencies, however. My understanding is that Russian officials have yet very limited knowledge about the advantages of this instrument.
“[I]t is sometimes very difficult to promote the technology when some in the Bitcoin community position it as overtly anti-state.”
Some of the government agencies have asked us about the gist of Bitcoin but for now there are surprisingly more requests for our expertise on the subject from abroad rather than from within the country. I do hope that this will change. But it is sometimes very difficult to promote the technology when some in the Bitcoin community position it as overtly anti-state: sad but true.
CT: Many publications such as Bloomberg and the WSJ have stated that Bitcoin technology is here to stay. Do you think it possible to integrate blockchain technology with the national monetary system in Russia similar to what has been proposed in Ecuador and the Philippines?
VD: I completely agree that the technology will be used further and in more projects in the upcoming decade. Yet, at this stage I am quite skeptical about its integration with national monetary system, be it in Russia and elsewhere. One thing is a conservative nature of the monetary policies: sometimes it is easier and cheaper to keep old ways instead of exploring something new. States need to know the exact, quantifiable benefits and should be aware of the associated costs first.
Second are the benefits for the customers. This may sound surprising but users in general do not like and do not benefit from anonymity. They want their payment instruments to be restored in case of theft, destruction, etc., with funds intact. Classic digital cash does not allow this and this is one of the reasons why first digital cash projects in the 1990-s (e.g. Digicash) were unsuccessful.
Speaking about Russia specifically, I think that this can be a point in discussion within the Central Bank in 5-10 years, minimum.
“I do not think that fines and a ban is a way to handle the risks that cryptocurrencies pose, just as any other technology.”
CT: What is your opinion on the fines proposed by the Russian authorities on the use and issuing of cryptocurrencies?
VD: We are concerned about the proposed legislation. I do not think that fines and a ban is a way to handle the risks that cryptocurrencies pose, just as any other technology. Probably, this approach of the Government is based on the limited understanding of the prospects cryptocurrencies have in the long run. At this point I can only say that we have informed the Ministry of Finance about our concerns and the potential drawbacks associated with the prohibitive approach.
CT: And what is your opinion on the Russian government proposing to ban all information related to cryptocurrencies?
VD: The proposal to ban the dissemination of information related to the issuing and transfer of the ‘payment surrogates’ is a logical way to enforce the prohibition of cryptocurrencies. Due to the decentralized nature of this technology, the authorities will have trouble finding parties to the transactions. But Russian regulation allows the issue of an order for all Internet providers in the country to ban access to certain websites.
“Technically, all websites providing software, web services and even the Wikipedia page on Bitcoin will be ultimately banned in Russia.”
Now, such measures are taken only against child pornography, information about suicide, drugs, and extremist materials. The approach of the legal draft is extreme and, if adopted, will significantly limit access to the information on cryptocurrencies. Technically, all websites providing software, web services and even the Wikipedia page on Bitcoin will be ultimately banned in Russia.
CT: If passed, do you think these regulations could be enforced given that the currency is decentralized similar to the internet? Does this not imply state control of the internet as well?
VD: I think that Internet is already more regulated than we like to think. Some degree of control is exercised in many countries. In China it is censored by the Great Firewall, in Russia Internet providers are made to block access to some websites, in the EU ‘the right to be forgotten’ can now be used. Fact is the transport for information is more or less decentralized. Websites, web services are not: they are always somewhere.
Whether we like it or not, states will regulate the Internet and that has nothing to do with Bitcoin. We have already seen this in payments: today almost no state wants foreign companies to process transactions for their citizens. I am pretty sure that in 15 years Google will find itself as much regulated in most countries as Visa and Mastercard now are. It is not the regulation itself but striking the right balance I am mostly concerned about.
CT: Bitcoin expert Andreas Antonopoulos appeared before a Canadian Senate and stated “I think this technology needs time to breathe, it needs time to show the full potential of what is possible with decentralized, programmable money”. Your thoughts?
VD: I do agree. Come to think about it that is true for any technology. If we tried to limit the expansion of the Internet, who knows what it would look like now. Same goes to any technological innovation. Will decentralized cryptocurrency change the way we pay? I do not know. And truth is, at this point, no one does.
Should we continue to explore the possibilities? Certainly. My belief is that the state should step back a little, at least for now. But regulation will be inevitable - this is one of the lessons history teaches us. I know that many Bitcoin users do not want that, but this is a fact.
CT: Many people have called Bitcoin the greatest invention since the Internet. Are there any concerns that Russia will be left behind with respect to technological innovation compared to more Bitcoin-friendly jurisdictions and tech-hubs such as the State of California, Isle of Man, Denmark etc.?
VD: This is one of the concerns we relayed to the Russian Ministry of Finance. From a legal perspective, I like to think about Bitcoin as a litmus test for regulation. Regulative approach towards cryptocurrencies reflects its flexibility and susceptibility to innovation.
This summer I spoke at the first large Bitcoin Russian conference in Saint-Petersburg and saw many bright entrepreneurs and researchers who presented their projects. Overly strict regulation will regrettably push them outside the country and Russia will definitely lose in this jurisdictional arbitrage. I still hope that it will not be the case. But this is one of the biggest concerns to date.
CT: Do you think Bitcoin has a future in Russia?
VD: At this point, I do not think that Bitcoin can become a mainstream mean of payment in Russia. We have rather elaborate and cheap payment products based on e-money transfers and payment cards. For example, Russia is the first country to make Visa card-to-card transfer. The other thing is technology itself. If the regulator opts for a milder approach, Russian businesses will be open to embrace its benefits, just as their counterparts in any other country.
President of the Russian Electronic Money Association Russia, Victor Dostov, will be taking part in a panel discussion at Mobile Money Global entitled ‘What will the dominant payments channels look like in 2024?’ Money & Digital Payments Global will take place November 18 - 20 at Wyndham Grand Istanbul Levent in Turkey.
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