Residents of the Russian Federation are among the most active participants in the cryptocurrency market, as stated in the Bank of Russia’s Financial Stability Review for Q2–Q3 2021.
The regulator pointed to a ‘rapid growth’ in the market capitalisation of digital currencies during 2021. According to BoR analysts, the main drivers are heightened investor interest in technologies including blockchain, smart contracts, decentralised finance and stablecoins.
The report, citing results of various studies by analytics firms, notes that Russian citizens are among the most active participants in the cryptocurrency market and users of crypto platforms — Russia ranks among the leaders in visits to the Binance exchange.
According to the regulator’s July 2021 survey of major banks, Russians’ annual turnover of digital currencies amounts to around $5 billion.
The central bank believes that cryptocurrency operations “pose significant risks to financial stability and investors, as well as climate risks”.
The central bank notes that the anonymous nature of cryptocurrencies facilitates their “massive use” by criminals, including for money laundering and financing of terrorism.
Among other risks the regulator cites is households moving part of their savings into digital currencies:
‘This problem is analogous to the problem of currencyisation, whereby residents of the country prefer to save funds in cash foreign currency’.
The BoR believes that cryptocurrencies cannot be considered a reliable store of value due to price volatility.
The report also mentions a high level of electricity consumption for Bitcoin mining.
‘Overall, at present the linkage between digital currencies and the financial sector remains limited; the probability of contagion from the crypto markets to key financial markets is low’, says the document.
Meanwhile, the central bank notes the rapid spread of digital currencies, which, in the BoR’s view, creates increasing risks for Russia’s financial market. In this regard the regulator calls for enhanced monitoring of the sector.
As noted, the Bank of Russia is known for its scepticism toward cryptocurrencies. In November, the head of the Bank of Russia Elvira Nabiullina stated that they threaten the financial stability of the state, and opposed the use of bitcoin as a means of payment for settlements within the country.
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