Yay or nay? What is Russia’s stance on digital currency?

Highlights

• The Central Bank of Russia (CBR) is bracing itself to separate cryptos from traditional financial institutions by enforcing stringent policies. 
• Russian citizens have been swept up in the crypto wave, eager to experience complete freedom and privacy in their financial transactions.  
• CBR, on the other hand, acts as a colossal bodyguard, preventing cryptos from making it big in Russia.

The world of crypto is quite fascinating. If you venture into the crypto world, you will either be exposed to risk or rewarded with wealth. But if you choose your path wisely, you might be able to hit the jackpot. 

This unpredictability, however, is dividing nations’ stance on digital currencies. Countries such as El Salvador, Singapore, and Brazil have taken significant steps to facilitate the adoption of digital assets by their citizens. Whereas countries such as China and Russia are taking an opposite stance and imposing strict crypto regulations. 

Furthermore, the Bank of England has recently issued a warning about the possibility of Bitcoin becoming worthless. 

The Russian Central Bank also announced new rules and regulations for mutual funds operating in the region, effectively prohibiting mutual funds from investing in cryptocurrencies. It comes at a time when the country's crypto regulations are still up in the air. 

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What is Russia's take on cryptocurrencies? 

In a recent move, the Central Bank of Russia reaffirmed its opposition to crypto investments, citing the volatility of virtual currencies as a key reason for its cautious stance. Elvira Nabiullina, the governor, recently stated that the regulator has the power to rein in the crypto affairs. 

Even though the Russian government has 'allowed' Russians to own, trade, and mine cryptos,  the citizens are prohibited from using it as a payment method, i.e. not for use in payments for goods and services.  

The chairman of the Russian State Duma Committee, Anatoly Aksakov, recently stated that a new legislation was needed to protect retail investors from crypto risks. 

Aksakov said, 

“Digital assets are the topic of our close attention, and here we will look at how to protect our citizens as much as possible when investing in digital currencies and digital assets, because here is a new tool, and it is quite difficult for an unqualified investor.” 

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What steps has Russia taken to stifle the crypto market? 

For the time being, Russia's cryptocurrency future appears hazy. The bank, which serves as Russia's chief regulator, is bracing itself to separate cryptos from traditional financial institutions by enforcing stringent policies. Here are few initiatives that are serving to thwart a crypto boom in Russia. 

• In July, the CBR prohibited the country's stock exchanges from listing any financial instruments whose value is determined by the prices of cryptos. Regulators now want to restrict mutual funds' involvement in cryptos. 
• The Bank of Russia made an official statement regarding the regulation of mutual investment funds on 13th December. 
• Fund managers are prohibited from investing in cryptos and financial instruments whose value depends on the price of digital assets, according to the document. Neither unqualified nor qualified investors are allowed to invest in cryptocurrency through mutual funds. 

• Holding undeclared cryptocurrency worth US$1,300 to US$13,000 in Russia is punishable by fines and even imprisonment. 

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Last month, the CBR released a review of the financial stability report. CBR highlighted significant risks linked with the crypto market in the report, citing a lack of financial stability and investor protection, as well as the potential for a rise in money laundering and criminal financing cases. 

Furthermore, the CBR has requested commercial banks to block crypto cards, wallets, and accounts of people who engage in fraudulent activities. 

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Future prospects 

The Central Bank of Russia (CBR) is taking a hard line against the digital asset market in Russia.  Hence, the fate of cryptos in Russia seems a little blurred. The most recent move by the Bank of Russia to safeguard the nation's economy from fraud and scams has come as a shock to Russian crypto enthusiasts. 

However, despite restrictions on traditional financial institutions' participation in cryptos, the Bank of Russia is intending to develop a ruble-backed Central Bank Digital Currency (CBDC). If everything goes according to the plan, the digital ruble pilot programme will begin next year.  

So, may be all is not lost for the Russian crypto enthusiasts. 

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