Cryptocurrencies Carry Systemic Risks, Threaten Ruble, Bank of Russia Insists

The growing interest of Russians in cryptocurrency, their large crypto investments and the high risk associated with crypto operations create potential systemsic threats, according to the Central Bank of Russia ( CBR) in its annual report 2021. The monetary authority added to the long list of negatives previously mentioned in relation to digital currencies such as bitcoin.

The circulation of money could be compromised and the sovereignty of the national currency may be lost.

This regulator reiterates earlier warnings that digital assets increase risk of outflow of money from traditional financial systems to the still unregulated crypto market. According to RBC Crypto, this transfer of savings could threaten the financial stability and banks in Russia.

Bank of Russia is still concerned about the well-being of citizens’ because it believes that the rise of the cryptocurrency market creates a bubble, while cryptocurrencies have characteristics of financial pyramids. The CBR states that investors have limited protection and can lose their investments in digital coins due to price volatility, fraud, and cyberthreats.

This report is coming after the January central bank proposed a ban all crypto activities. Its hardline proposal was met opposition by other government institutions. The CBR introduced legislation in February that prohibited cryptocurrencies. It is unlikely that it will be supported as many Moscow officials now see the opportunity to use crypto assets in order to bypass western sanctions.

The Ministry of Finance is leading efforts to legalize cryptocurrency operations. Bitcoin payments are exempted from this list. recently resubmitted the bill “On Digital Currency” to the federal government, which supports its approach. The draft law includes provisions that regulate crypto mining. The Bank of Russia indicated that it might accept legalization of the industry.

According to the central bank, $5 billion worth of crypto transactions were made last year by Russian citizens. The regulator acknowledged that Russians are active traders on digital asset exchanges, and that their country is among the top-ranking countries in terms of digital coin mining capacity.