The Autonomous Republic of Abkhazia has announced a plan to raise a billion dollars worth of cryptocurrency via an ICO. The breakaway state has long vied for international legitimacy and has struggled to attract investment to fund its internal development projects — a situation it hopes to turn around by creating a state-sponsored cryptocurrency.
At a conference in Moscow last week, Abkhazian government officials Adgur Ardzinba and Evgeny Galiakhmetov stated that the fledgling country would soon begin selling Abkhazian Republic Coins (ARC). They said the cryptocurrency (limited to 8 billion coins) would be open to foreign investment and that ultimately it would become the country’s sole legal currency. Abkhazians would have a great incentive to adopt the ARC coins they said, as for the first three years the government would waive a range of taxes for market participants who use the coins.
Although Abkhazia has a unique ethnic identity which can be traced back centuries, it was a part of the USSR until its fall and then became a part of the breakaway state of Georgia in 1991.The following year, ethnic Abkhazians declared their independence from Georgia and expelled over 200,000 Georgians from their region in a war some have called an ethnic cleansing. Although it militarily controls its land and keeps its boundaries separate from Georgia, the breakaway state was not acknowledged by any other nations until 2008 when Russia and three other countries agreed to recognize it. Today the country is considered disputed territory by Georgia, but hostilities have ceased and Abkhazia survives primarily through its close ties with Russia.
Ardzinba stated that the ARC initiative would be launched later this year, with the government introducing the ARC coin fully into the country’s economy by the spring of 2018. He cited Ardzinba’s lack of broad political recognition as the primary motivating factor in coming up with this unconventional solution to increase development in Abkhazia.
While the region is currently using a mixture of Russian rubles and Georgian Hryvnia in its economy, Galiakhmetov said that Abkhazia would completely abandon other forms of currency and have an economy based entirely on its own cryptocurrency (Georgia too, has a long history of bitcoin and blockchain adoption, especially since it is a major hub of the world’s second-largest bitcoin mining company, Bitfury).
Ardzinba noted that during his visit to Moscow, Abkhazian President Raul Khajimba had met with Russian President Vladimir Putin and discussed the ARC cryptocurrency idea. According to the publication Meduza, which interviewed an anonymous source close to the government of Abkhazia, Putin approved their plans for the cryptocurrency.
Even if all goes as scheduled, Abkhazia may not be the first country to make a cryptocurrency legal tender, however, as President Putin himself announced just last week that he plans to make the CryptoRuble - a long-rumored project to make a fiat cryptocurrency — legal tender across the Russian Federation this year.
“We will run CryptoRuble just for one simple reason: if we don’t, our neighbors in the Eurasian Economic Community will do it in a couple of months."
— Russian Communications Minister Nikolai Nikiforov
Despite Putin’s discouragement of cryptocurrency use in the past, in the last month he has warmed to the Finance Ministry’s CryptoRuble project, ordering that it be issued as soon as possible. Russian Communications Minister Nikolai Nikiforov stated, “I am confident to declare that we will run CryptoRuble just for one simple reason: if we don’t, our neighbors in the Eurasian Economic Community will do it in a couple of months.”
The statement reflects the thoughts of many other countries who have publicly spoken about issuing their own national cryptocurrencies. Although their exact definitions of a national cryptocurrency differ, they typically want to take advantage of the blockchain technology and peer-to-peer payments, while still maintaining control over the issuance and identities associated with each payment.
Other countries who have declared they are working on a national cryptocurrency include China, Japan, Tunisia, Senegal, Sweden, and Venezuela. At the end of September, the city of Dubai had launched emCash, which it described as a national cryptocurrency for UAE citizens to use for everyday expenses alongside their traditional currency. Details have been scarce on the offering, however, so it is yet to be seen if the payment system is a real cryptocurrency or another centralized project like Ecuador’s national digital fiat currency.