The Central Bank of the Russian Federation called for a ban on the circulation and mining of cryptocurrency in the country. This became known from a report for public consultations, which the Central Bank published on its website .
What does the Central Bank offer?
At the very end of the report, the agency proposes to ban the circulation of cryptocurrency. There will be some liability for violation.
The Central Bank proposes to introduce responsibility for the organization and mining itself, as well as for organizing the purchase, sale and exchange of cryptocurrency.
The ban will not apply to the possession of cryptocurrency by citizens of the Russian Federation.
What does it have to do with
One of the points of the report was “Risks of Cryptocurrency Spread”. In it, the Central Bank of the Russian Federation describes several reasons: the risk to the well-being of citizens, the threat to financial stability and the threat associated with illegal activities. Let’s consider these reasons in more detail.
Citizen Welfare Risk
The bank believes that the citizens of the Russian Federation are so dependent that they can easily lose their fortune due to sharp jumps and drops in cryptocurrencies. Here you can retort with the fact that on the most real exchanges, where private investors buy and sell real shares, you can also lose your entire fortune. At the same time, some positions take off very easily and fall just as easily.
Particularly pleased with this part:
The functioning of cryptocurrencies is also similar to the functioning of financial pyramids: the growth of their price is supported by demand from new participants entering the market. Individuals who have become investors for a long time sell cryptocurrencies at a high price and in fact do so at the expense of new participants. Sooner or later, such a pyramid may collapse, and its participants will lose their funds.
That is, any purchase of shares is also a pyramid scheme? Central Bank, some not very good argumentation!
As confirmation that cryptocurrencies carry a risk, cases of attacks on exchanges by hackers are mentioned. An example is the case of 2014, when the Japanese crypto exchange Mt. Gox announced that the attackers stole 850,000 bitcoins.
Surprisingly, right at the time of writing this text, it became known that the Crypto.com crypto exchange admitted the fact of the theft of cryptocurrency in the amount equivalent to $ 30 million.
The Central Bank also recalls that crypto exchanges themselves steal funds. There are already three cases: one is associated with the Turkish crypto exchange Thodex, and two with South Africa.
The strongest argument is the limited legal protection of crypto investors. The difficulty lies in the inability to protect the interests of citizens:
[The transactions are] cross-border in nature, so investors will have to apply to foreign jurisdictions to protect their rights.
Also, crypto investors do not inform the Central Bank about their investments, so their interests cannot be protected.
Threat to financial stability
According to the Central Bank, the circulation of cryptocurrency can “undermine the circulation of money and lose the sovereignty of the national currency.” And again a strange argument. Interestingly, this oddity is emphasized in the report itself:
This problem (cryptoization) is similar to the problem of currencyization (growth in cash, foreign currency deposits or investments in foreign securities), which is primarily characteristic of emerging markets.
That is, it says here that the ruble can easily turn into nothing because of the cryptocurrency. At the same time, there is no official turnover of this very cryptocurrency, but there is a turnover of foreign currency. According to Bloomberg, Russian crypto wallets contain seven trillion rubles worth of cryptocurrencies. Rossiyskaya Gazeta writes that Russians of all foreign currencies have accumulated approximately $100 billion (about 8 trillion rubles). Over the past year, the amount of foreign currency has grown by 10%.
The phenomena that reinforce the argument that cryptocurrency is a threat to financial stability include the risk of a decrease in the volume of financing of the real sector of the economy, the outflow of capital from the Russian Federation and the weakening of the ruble, the risk of an overflow of funds from bank deposits, as well as a decrease in the financial stability of banks.
The threat associated with illegal activities
Well, everything is clear here anyway: you can buy illegal stuff with cryptocurrency and sponsor terrorists. Cryptocurrency can also be used to launder money, extort money and promote corruption.
Actually, everything is the same that you can do with ordinary money.
What the sources say
The fact that the Central Bank will advocate a ban on cryptocurrencies in the territory of the Russian Federation was reported by Bloomberg, citing two unnamed sources. There is no open access publication, but it is in the presentation of Interfax and in another Bloomberg text.
The bottom line is this: the ban is being lobbied by the FSB, since more and more often cryptocurrency is a way of sponsoring undesirable organizations like foreign media agents and individuals who conduct opposition activities.
Reaction
The largest crypto exchange Binance stated that it is ready for dialogue with the Central Bank:
We are open to dialogue and discussion of protecting the interests of respectable Russian users of cryptocurrencies. Binance takes its compliance obligations very seriously and is committed to working with regulators to create policies that protect users, encourage innovation, and move our industry forward.
The main problem with cryptocurrencies is that they are not regulated by law in any way. The Central Bank immediately becomes aware of cross-border transfers in ordinary currency. And cryptocurrency is a shadow sector, which is now impossible to monitor.
