Russian Central Bank Seeks Ban on Crypto Investments

In a next level move to address the skepticism of the Russian central bank against Bitcoin, Shiba Inu and other digital tokens, not unlike several other central banks so far, Russia’s central bank is looking to restrict the financial risks of the country with a complete ban on future transactions in crypto investments.

According to Reuters, leading cryptocurrency bitcoin fell after this report to $48,656 from levels around $49,144, on 16 December 2021. Russian authorities have long been adamant in their stance against cryptocurrency, in consideration of it being instrumental in facilitating financial crimes like money laundering on multiple occasions. Russia’s current position is a “complete rejection” of all cryptocurrencies, as cited by Coindesk on this issue.

The country has granted cryptocurrencies with a legal status in the past before, but its use as a currency, or in other words, for payments, is forbidden still. The ban under deliberation would not force current investors to divest their portfolios, but engaging in any future transactions in the same will be prohibited. The country’s central bank has already issued new rules for mutual funds, where funds cannot invest in digital currencies or “financial instruments, the value of which depends on the prices of digital currencies.”

Following the Trend: Courtesy China

Following China in this sphere in recent years, the Russian regulator had plans to launch a central bank regulated, ruble-backed digital currency (CBDC) pilot program in December, but this deadline has been moved forward to early 2022, which is when the digital ruble will be in a pilot program before its official launch. Talks of having a central bank curated cryptocurrency seems to be in the works for the Indian government too.

Even the bank of Thailand issued warnings over cryptocurrency investments, enforcing their usage in payments to be disallowed. While Thailand’s tourism ministry begs to differ in their opinion on the decision, the central bank prepares to regulate the market with its own report on “red lines” for crypto operators and businesses.

Likely Risks of the Decision

With nearly 12% of the population already owning crypto (compared to a little over 8% of the U.S. population), the crypto market has become a noteworthy business in Russia. Estimates taken from Reuters show that roughly $5 billion in crypto transactions take place annually within the country.

Central Bank First Deputy Governor Ksenia Yudaeva claimed in an article that “the situation in developed market countries more and more resembles the so-called shadow financial system,” also emphasizing that utilization of cryptocurrencies lowered the efficiency of monetary policies.

Fearing the risks to financial stability that come along with the emergence of this digital money market, their crackdown on cryptocurrencies comes in reference to China’s efforts to ban crypto mining earlier this year, where the central bank announced all crypto transactions as illegal in September.

Sneh Dokania is an Economics major student with an inquisitive disposition seeking to articulate facts, information and news stories in a candid manner on Clout News.

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