The spread of cryptocurrencies brings significant risks for Russia’s economy, financial stability, and national fiat, the monetary authority in Moscow has reiterated. As the Russian government is preparing to regulate cryptospace, the central bank reiterated its strict stance against decentralized digital money in a newly published report.
Central Bank of Russia issues warnings about cryptocurrencies
Russians’ growing interest in cryptocurrencies, their significant crypto investments, and the high risks associated with crypto operations create potential systemic threats, the Central Bank of Russia (CBR) has pointed out in its annual report for 2021. In its annual report for 2021, the Central Bank of Russia (CBR) emphasized a number of issues previously overlooked in regards to bitcoin and digital currency.
The circulation of money could be compromised and the sovereignty of the currency national is at risk.
This regulator reiterates earlier warnings about digital assets increasing the risk that funds will flow from traditional financial systems to the still unregulated cryptocurrency market. The CBR, quoted by RBC Crypto, stated that this transfers of savings is threatening the financial stability Russian banks.
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 characteristics of financial pyramids. The CBR states that investors have limited protection and can lose their investments in digital currencies due to volatility and fraud.
This report follows a January central bank proposal to ban most cryptocurrency activities. The CBR’s proposal to ban crypto activities was rejected by other institutions. The CBR introduced legislation in February that prohibited cryptocurrencies. However, it is unlikely to win support as a growing number of officials in Moscow now see opportunities to employ crypto assets to circumvent western sanctions imposed over Russia’s invasion of Ukraine.
The Ministry of Finance has been leading efforts to legalize 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. Now, the draft law includes provisions that regulate crypto mining. In the meantime, the Bank of Russia suggested that they may allow the legalization of crypto mining.
Further, according to certain estimates, Russians made $5 billion in crypto transactions last year. Russians have been actively trading on digital asset exchanges and their country ranks among the world’s leaders in terms of digital coin-minting capacity, the regulator has acknowledged.
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