According to some observers, the recent slump in the cryptocurrency market over the past three days is partly due to the announcement made by Russia’s central bank on Thursday that it would ban cryptocurrencies.
Cryptocurrencies in Russia
This is certainly not the first time that Russian authorities have made such an announcement. Already last year, several times, both the central bank and the Duma, had reiterated the desire to put a brake on the spread of digital currencies in the country, but the announcements were never followed by concrete facts, and it is very likely that in this case, as they say, there’s a lot of fuss for nothing substantial.
For years, Russia has considered cryptocurrencies as a possible threat to the country’s financial stability and security, claiming that they would be used in money laundering or to finance terrorism.
On the other hand, according to data from a report of the Russian Central Bank, transactions with cryptocurrencies in the country have reached the value of $5 billion per year.
The report “Cryptocurrencies: trends, risks, measures” was presented during a press conference by Elizaveta Danilova, director of the Bank of Russia’s Financial Stability Department.
In the report, it is emphasized that the cryptocurrency market has become like a kind of highly speculative financial pyramid scheme and therefore it is necessary to put a brake on it.
However, Danilova specifically said:
“For now, there are no plans to ban cryptocurrencies similar to China’s experience. The approach we have proposed will be sufficient”.
So there would be no explicit talk of a ban tout court, but rather a precise regulation, to stop the excessive speculation and illegal uses that are made through the use of cryptocurrencies.
Ban on payments and institutional investments with cryptocurrencies in Russia
According to the bank, what should be banned is cryptocurrency payments, but not the possession or the trading of cryptocurrencies, as some people wanted us to believe.
A few hours after Danilova’s press conference, Joseph Edwards, head of financial strategy at cryptocurrency company Solrise Group, downplayed it by stating that:
“Moscow, like Beijing, is always rattling its sabre over ‘crypto bans’, but Russia has never been a pillar of any facet of the industry in the same way as China has been at times”.
What seems more likely, however, is that the scope will be narrowed to investment funds that wanted to invest in cryptocurrencies, as proposed back in December
Some observers speculate how the ban could instead also affect mining activity, which is very flourishing in Russia, which has become, after the Chinese ban, the third country in the world with regard to Bitcoin mining, after the US and Kazakhstan.
This is because the central bank has explicitly stated that mining would be causing energy problems for the country and therefore a precise restriction on this activity would be needed.
A few months ago, Vladimir Putin had also spoken about cryptocurrencies, defining them as a well-established asset and therefore excluding in practice a possibility that they could be banned.
Finally, it should also be stated that Russia, right after China, would be the closest major country to launching a digital ruble, having successfully carried out several tests in the last two years.
It is therefore likely that these statements by the central bank are more aimed at preparing the ground for the imminent launch of a digital state currency. And it is therefore clear that the excessive spread of cryptocurrencies could be destabilizing for a digital state currency and for the country’s future financial stability.