A damning report by Russia’s central bank has slammed cryptocurrency as a pyramid scheme that could destabilise the economy.
The dossier – ‘Cryptocurrencies: trends, risks, measures’ – warns the growth of digital assets is driven primarily by speculation.
The volume of crypto-transactions in Russia hovers at $5bn per year, said the bank’s director of financial stability – Elizaveta Danilova – adding that Russian citizens were active users of crypto trading platforms that trade cryptocurrencies.
“The long-term potential of using cryptocurrencies for settlements seems limited and the rapid growth of their market value is determined by speculative demand in the expectation of further growth of the exchange rate, which leads to the formation of a bubble,” the bank wrote.
According to the report, the spread of cryptocurrencies pose “significant threats to the well-being of Russian citizens and the stability of the financial system”.
It added that the high volatility of the exchange rate, as well as the significant prevalence of fraud in cryptocurrency trading, create risks for citizens of losing a significant part of invested funds and, when trading with borrowed funds, risk of remaining in debt.
“Crypto, as well as currency, limits the sovereignty of monetary policy, as a result of which, in order to contain inflation, it will be necessary to maintain a higher level of the key rate on an ongoing basis,” the banking chief explained.
“This will reduce the availability of credit for citizens and businesses.”
The bank concluded Russia needs new laws and regulations to effectively ban crypto-related activities.
However, the bank stressed it was not suggesting banning ownership of crypto by private citizens.
“The spread of cryptocurrencies leads to the withdrawal of citizens’ savings beyond the perimeter of the Russian financial sector and, as a result, a reduction in its ability to finance the real sector and reduce the potential growth of the economy, which reduces the number of jobs and the potential for income growth of citizens,” Danilova added.
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