Breakaway Abkhazia plans to launch its own cryptocurrency in a bid to avoid potential sanctions and attract international investment, according to the territory’s de facto economy minister, Adgur Ardzinba.
Whether the de facto Abkhaz government can pull it off is unclear, but, if successful, the idea could give separatist regions throughout Eurasia an example of how to diversify the options for their financial survival.
“The advantage of this [cryptocurrency] market has to do with the fact that any citizen in the entire world can invest in our economy, not fearing sanctions or other awkward limitations placed on us by the international community,” Ardzinba posited in an October interview with Abkhazia’s official Apsnypress news service.
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The reason why is blockchain; a digital ledger of encrypted transactions that forms the basis for Bitcoin, Ethereum and other encrypted units of exchange, or cryptocurrencies.
No central bank is required. In fact, with an internet connection and the right equipment, you can generate your own encrypted currency in minutes.
That's raised concerns about governments or international regulatory institutions being able to trace currency flows. As former US President Barack Obama once commented, if the government can't crack the code that sustains a cryptocurrency, "then everybody's walking around with a Swiss bank account in their pocket."
Arguably, that's part of the reason why other Russia-backed breakaway regions have shown an interest in exploring blockchain, too. The so-called Donetsk People’s Republic in eastern Ukraine held a blockchain conference in 2016 to size up investor interest, while Transnistria reportedly has caught the eye of Russian businessman Igor Chaika, a son of Russia’s general prosecutor, Yuri Chaika.
Talk of Abkhazia's prospective currency also coincides with a debate in Russia, Abkhazia’s financial backer, about its own crypto-choices. After some flip-flopping, Moscow now appears to be preparing for a Kremlin style of cryptocurrency – a virtual currency generated, or “mined,” only by Russia’s Central Bank.
Details about what degree of control Abkhazia will attempt to exercise over its own planned cryptocurrency do not exist. The region's de facto economy ministry, which, according to Ardzinba, has been researching cryptocurrencies since March, did not respond to questions from Tamada Tales.
Both late 2017 and spring 2018 have been named as possible release dates for the Abkhaz coins.
Blockchain Solutions Group, a recently formed Moscow-based consultancy, has been avidly plugging the project.
At an October cryptocurrency conference in Moscow, the Group’s managing partner, Yevgeny Galiakhmetov, stated that just 8,600 Abkhazian Republic Coins (ARCs) will be released; a number meant to approximate Abkhazia’s area in square kilometers, Meduza reported. Abkhazia will grant a three-year tax holiday to those who make use of the so-called ARCs, Galiakhmetov claimed.
Russian investors, actually, already have tried setting up cryptocurrency mines in Abkhazia, but, apparently, with mixed results. While electricity rates are relatively cheap, some complained to Meduza about power outages and the quality of electricity. Another about legal protections for his investments.
A third worried about facing penalties if he used his American-supplied chips to generate cryptocurrency in Abkhazia.
If obstacles for crypto-investors aren’t overcome, commented one site that tracks Abkhaz investments, “all the good wishes and plans [for an Abkhaz cryptcurrency] will bring to mind the organization of an inter-galactic chess tournament.”
But Ardzinba, who hopes to see blockchain-backed "smart contracts" throughout the de facto Abkhaz government, remains confident.
Cryptocurrencies are a phenomenon that can’t be stopped, and Abkhazia could reap the early-entry advantages, he believes. “There’s no sense in spending energy on blocking new technologies,” he said.