The Central Bank of Russia Issues Warnings About Cryptocurrencies

The Central Bank of Russia Issues Warnings About Cryptocurrencies

 

A new report published in Moscow has highlighted how the spread of cryptocurrencies can enhance significant risks for Russia’s economy, financial stability, and national fiat. The central bank has reaffirmed its hardline stance on decentralised digital money while the government prepares to regulate the Russian crypto space. 

The Central Bank of Russia (CBR) has indicated in its annual report for 2021 that the Russian people's growing interest in cryptocurrencies, their significant crypto investments, and the high risks associated with crypto operations create potential systemic threats. In an expanding list of previously highlighted negatives related to digital currencies, the monetary authorities have stated:

There is a risk of undermining the circulation of money and a loss of sovereignty for the national currency. The regulator is repeating earlier warnings that digital assets increase the risk of an outflow of funds from the traditional financial system towards the still largely unregulated crypto market. The CBR says, quoted by RBC Crypto, that this transfer of savings threatens the financial stability of Russian banks.

The Bank of Russia remains concerned about the "well-being of citizens" as, in its view, the growth of the crypto market forms a bubble while cryptocurrencies bear the characteristics of financial pyramids. Investor protection is limited to investments in digital coins. It can be lost due to price volatility, fraud, and cyber threats, the CBR adds.

The report of the central bank suggested a ban on most crypto activities in January. Its hardline proposal was met with opposition from other government institutions. In February, the CBR presented legislation prohibiting cryptocurrencies. However, a growing number of officials in Moscow now see opportunities to employ crypto assets. They believe that it can help circumvent western sanctions imposed over Russia’s invasion of Ukraine.

The Ministry of Finance has been leading in the efforts to legalise cryptocurrency operations, with the exception of bitcoin payments, and recently resubmitted its new bill "On Digital Currency" to the federal government, which backs its approach. The draft law now features provisions on regulating crypto mining. Meanwhile, the Bank of Russia has also indicated that it may accept the legalisation of this industry.

The central bank further estimates, that the volume of crypto transactions by Russian residents reached approximately $5 billion last year. Russians have been actively trading on digital asset exchanges and their country ranks among the world’s top countries in terms of digital coin-minting capacity. This has been acknowledged as well.