Bank of Russia flags concerns over Finance Ministry’s cryptocurrency-regulation concept

The Bank of Russia has reviewed the Finance Ministry’s proposed concept for regulating cryptocurrencies and raised concerns about several provisions. This was announced by the Bank’s press service, cited by TASS.

The Bank of Russia noted that allowing cryptocurrencies into the financial system poses risks to its stability.

The regulator contends that the Finance Ministry’s concept confuses terms in respect of protecting individuals and legal entities by legitimising trading in crypto assets and by imposing requirements on operators of digital currencies exchanges.

“However, given that most cryptocurrencies lack an issuer, an accountable party, the risks for citizens investing in such instruments will be shifted onto Russian financial institutions, and ultimately onto their depositors and creditors,” the Bank of Russia noted.

The regulator noted that allowing deals with crypto assets only for qualified investors would still not affect the risks associated with digital currencies. The Bank believes financial literacy will not prevent these risks, as “the exchange rate of cryptocurrencies is determined predominantly by speculative factors”:

“The concept of identifying qualified investors assumes that they undertake deals with complex, risky financial assets, but assets where the issuer is known, and risks can be assessed by gaining sufficient financial knowledge.”

The Bank of Russia again called the “optimal solution” to ban the use of Russian infrastructure for cryptocurrency operations:

“Legalisation and regulation will create the illusion of protection and a level playing field for people, encouraging them to think that if the state allows it, there are no risks. As a result, this market will become increasingly widespread until the bubble bursts.”

The Bank of Russia expects the Finance Ministry to publish its concept for public discussion soon, so market participants can fully assess the ministry’s proposals.

As reported earlier, the Bank of Russia presented a report proposing to ban the circulation of cryptocurrencies and mining on the territory of Russia.

In the Finance Ministry opposed the initiative, saying there is a need to regulate the market.

Media, citing the ministry’s prepared document and a letter to the government, published details of the Finance Ministry’s concept regarding cryptocurrencies.

It envisages conducting operations with digital assets through banks, full identification of users, dividing investors into qualified and non-qualified, and transaction monitoring. The ministry’s proposals have already been supported by Rosfinmonitoring and the Russian Direct Investment Fund.

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