Will Russia follow China's footsteps with Crypto ban?

Highlights

• The Central Bank of Russia (CBR) has been questioning the risks around cryptocurrencies and may be thinking about banning cryptos all together.
• Anatoly Aksakov, chairman of the Duma Committee on the Financial Market, indicated that the authorities are exploring the option of legalizing the exchanges.
• In July, the Bank of Russia reported that in total volumes of cryptos and soared to 350 billion Rubles (US $5 billion).

With call of cryptocurrency regulations growing, it seems Russia is thinking about banning cryptocurrencies all together. If it does so, it would be the sixth country to ban cryptos as a mode of payment. Earlier, China waged a war on cryptocurrencies by terming all crypto transactions illegal. The People’s Bank of China (PBOC) on 24 September announced that it will not be permitting cryptos as a mode of traditional payment. Besides this China, cryptocurrencies are illegal in Indonesia, Bolivia, Turkey and Egypt.

Now, the Central Bank of Russia (CBR) has been contemplating on the risks that cryptocurrencies bring, along with how the volatile market could lead to a financial crisis across the world.

Several news reports from Russia revealed that the CBR is seriously considering a ban on investment in cryptocurrencies. The Central Bank believes that cryptos pose serious risks to financial stability and the rising number of crypto transactions had caused concerns for the leading bank.

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Though Russia gave a legal status to cryptos in 2020, but the higher authorities have often questioned cryptos as it believes that it could be used in various money laundering and terror financing activities. Even Russian President Vladimir Putin is not an ardent supporter of the cryptos. Putin in November had called for monitoring and regulation of cryptocurrencies.

Still in its infancy, the Russian government has often talked about introducing regulations, but the ban news coming out could perhaps indicate a further stringent stance by the Putin government.

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Increasing crypto adoption

Russian citizens, however, have been more welcoming towards the adoption of cryptocurrencies. Cryptocurrency use among the Russians have risen every year. The Bank of Russia reported in July 2021 that total volumes of cryptos and soared to 350 billion Rubles (US$5 billion). Since then, the price of Bitcoin has almost doubled from around US$30,000 to achieve its all-time high of US$68,000 in November 2021.

The ban could also showcase Russia’s ambition to launch its own cryptocurrency. The regulators have been planning a pilot program for the state-run CBDC Crypto Rubble from 2022. However, the increased adoption has also given Russia an alternative as well to regulate it instead of a blanket ban.

Talks of regulations

While the blanket ban is the favourite call of the CBR, but there are few experts and economists who believe that the central financial authority will not be banning cryptos, but it could go for stringent regulations. Anatoly Aksakov, chairman of the Duma Committee on the Financial Market, said that the authorities are exploring the option of legalizing the exchanges.

The legalisation of exchanges would make things transparent, and the authorities can monitor crypto transactions and it can be bought under the Federal Tax Service (FTS). 

Conclusion

The year 2022 could see historic changes in cryptocurrency market all over the world. CBR has taken a conservative approach towards cryptos and has always opposed its acceptance and free circulation of Bitcoin and the likes.

A blanket crypto ban could have a deep impact on the market with the market is seeing significant price drops and could see a bearish phase. Having said that, with all the countries of the world considering regulations in the near future, many experts believe Russia could adopt the same approach.