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Russia Bans Bitcoins

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Russia opens up it’s borders to the world for the Sochi Olympic games this week, there’s something that the nation will not welcome with open arms: Bitcoins.

On Thursday, the Russian Prosecutor General’s office issued a sternly worded press release, saying in part, “Bitcoin is a money substitute and cannot be used by citizens and legal entities.” Russia also referred to the virtual currency as “suspicious”.

The bitcoin is a virtual, independent-style of currency, designed for Internet use. It does not exist in the traditional sense of coins or paper. It is also not associated with any particular country, nor does any government regulate it.

In making the decision, the official release points to a 2002 law, signed into effect by Russian President Vladimir Putin. That law states that the ruble is Russia’s official currency, and other money cannot be substituted.

The Russian government also says the move is in response to the use of bitcoins, and other similar digital currency, by criminal organizations. It is unclear, though, what this means for people who simply possess bitcoins. Russia is not alone in the pushback against virtual currency. Both China and Denmark have banned their deposits.

The United States does not have any such ban. Although the FBI shutdown the suspected online drug black market, Silk Road, which thrived under bitcoin use, other U.S. companies are finding new ways to prosper with it. The U.S. Postal Service is even looking at adding a bitcoin exchange. It remains to be seen how other countries and nations will react to the use of virtual money in the future, and whether new laws will go into effect to regulate it.

Under the largest U.S. site for buying and selling bitcoins, Coinbase.com, the value of bitcoin fell from $780 to $700 after the announcement from Russia. By mid-afternoon, Friday, the price was back up to $750, though other factors may have played a part in the fluctuation.

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