Mikael Alemu is a CEO and co-founder of “10 Green Gigawatt for Ethiopia”, an international initiative to transform Ethiopian energy systems and introduce solar energy as a major source of electricity. He contributes regularly to the Telegram channel t.me/tengigawatt, join this channel to read.
One can hardly imagine a modern capital or a major city that doesn’t have its own Manhattan: a shiny cluster of glassy skyscrapers. Old capitals of Europe tend to keep this “fashion item” off-center, assigning a “skyscrapers’ quarter” further from the historical center. Moscow, the capital of Russia, follows this trendy approach. A dozen or so Moscow skyscrapers are clustered 10 kilometers to the west of Kremlin in so-called Moscow City, that hosts ministries, government-owned banks, state corporations and a few remaining multi-billion private holding companies. However, some tenants of blue-green colored towers of Moscow City are engaged in very special kind of business operations. Moscow City is a home to crypto-money launderers, who accept bags of cash in exchange for bitcoin transactions. There are at least 10 (sic!) different “cryptocurrency exchange offices” in Moscow City, and they are processing 7-10 billion dollars’ worth of cryptocurrencies each month. Yes, you’ve heard me right – the Russian black market of crypto is comparable to the full GDP of Ethiopia.
One may ask – why would I ruminate about a gigantic cold country at the very north of our planet while writing about Ethiopia – a bit smaller, a lot warmer, and much better located? Good question, as my professors at Harvard would say, and it has two answers.
First, I was advising the Government of Russia regarding crypto. That was a while ago, in 2014-2016, but the debate hasn’t changed much since then. One part of the government – in Russian they are called “siloviki” – argued for a total ban on crypto and criminalizing it in a same way that heavy drugs are criminalized: you cannot use, own, possess, transport, transfer. Another part (and I was an advisor to those people) argued that the technology behind crypto (distributed ledger, i.e., blockchain) must be supported and encouraged, while the financial instrument of cryptocurrencies is to be entered into economic reality, taxed, and accounted for. No one in the Russian Government has advocated for the full adoption of some cryptocurrency as an official currency for the country – that would be a clear violation of the sovereignty of the state, as currency emission is the state’s prerogative and one of the most important mechanisms that supports work of the government. What we see in Ethiopia reminds me of that dichotomy a lot: the government must either ban/criminalize crypto or make it a legal tender of value, taxable and accountable. It seems that the Ethiopian Government has chosen the same path that Russia has chosen 6 years ago: do nothing. No statement was issued by Ethiopian law enforcement ministries or ministries in charge of innovation/technologies. The National Bank of Ethiopia has stated its professional and calm position: cryptocurrencies are not a legal tender of value in Ethiopia, please refrain from using it. The Russian Central Bank has issued statements in that exact voice in 2014 and then in 2017 – as did Central Banks in Europe, US, and many other countries.
A second reason that had me refresh my memory is to tell a “Russian lesson” for every person who believes that cryptocurrencies will change the world. This “new world” looks like this: Chinese clothes are being sold at street markets of Moscow for the non-registered cash; by the end of the workday this cash is bagged in huge sacks, driven to the” crypto exchange” offices in Moscow City; “exchange” office sends USDT (cryptocurrency that is nominated in dollars) to China on behalf of the client to buy more clothes to sell. In the “new world” of modern-day Russia bribes are paid in crypto; ransoms are collected in crypto; arms and drugs are sold in crypto. Avoiding international sanctions Russian companies pay suppliers in crypto and Russian citizens transfer substantial amounts across the globe avoiding local and international control and taxation.
The criminal world was an early adopter of bitcoin. The Bitcoin blockchain was launched in 2009. In two short years most of the cryptocurrency was fueling the success of “Silk Road” – an infamous black market online platform, dubbed “Amazon.com of dark web”. “Silk Road” soon became a leader in drugs and arms trade, to be shut down by the FBI in 2013. Almost 10 years have passed since then, and now cryptocurrencies serve every kind of shady financial transactions: from simple tax evasion to bribes and ransoms, from sales of sanctioned oil-extraction technologies to arms, drugs and mercenaries’ pay.
We may look at crypto as a three-headed dragon. First head is an ugly head of cryptocurrency as an unregulated payment mechanism that permits bad actors to transfer illicit funds for illicit reasons. No wonder that every government in the world is against this. Second head is a beautiful head of cryptocurrency that can fund charities and development projects, can bring financial services to the unbanked, can create monetary incentives to non-profit activity. It is almost impossible to find someone willing to stop this ‘force of good’. Many countries allow cryptocurrencies as a trade-able asset like gold or diamonds thus providing a regulatory framework, albeit with regulatory restrictions and certain taxation. And the third head is a nerdy head of blockchain technology that is decentralized database with built-it heavy encryption. Many smart people think that blockchain technology has unlimited potential to improve the world. There are two different ways for governments to approach a technology side of crypto: some will encourage and motivate the development of blockchain-based projects, while others will prefer technology-agnostic approach and leave it to the market/investors/customers to decide on the most promising technology.
I would leave you with three simple questions:
- Do you believe that the government can stop illegal use of crypto without banning it? How exactly can this be executed?
- Do you believe that the cryptocurrency market will flourish if crypto will be treated as other valuable assets: registered and taxed?
- Do you think that there is a way for the government to decide which technologies should be prioritized for development?
Mikael Alemu is a CEO and co-founder of “10 Green Gigawatt for Ethiopia”, an international initiative to transform Ethiopian energy systems and introduce solar energy as a major source of electricity. He contributes regularly to the Telegram channel t.me/tengigawatt, join this channel to read.
