Bank of Russia signals plan to curb citizens’ involvement in cryptocurrencies

Investments in cryptocurrencies are comparable to a foreign-currency mortgage, and the Ministry of Finance’s proposed market-regulation concept only creates new risks for the welfare of Russian citizens and financial stability. About this заявила the head of the Bank of Russia, Elvira Nabiullina.

According to her, the government had not discussed the approved concept with the Bank of Russia.

«Discussion lies ahead. In the development of cryptocurrencies we see threats to the welfare of citizens, financial stability, and the financial market. The Ministry of Finance’s concept speaks of the benefits of legalization. We doubt this», — she said.

The central bank chief emphasized that the concept has not yet disputed a single one of risks highlighted by the regulator.

«[The Ministry of Finance calls for market legalization] due to the high level of citizen involvement. The Central Bank, by contrast, wants there to be fewer such people,» she said.

She cited the example of foreign-currency mortgages that people willingly took on without understanding the risks.

«Then came the question of why this was not prohibited; these problems had to be addressed by the government and the central bank. At the same time, the scale was much smaller than with cryptocurrencies», — said the head of the Bank of Russia.

According to her, the legalization of cryptocurrencies and the involvement of commercial banks in the market portend extensive participation by financial institutions in money laundering and cashing out.

«The argument that taxes can be collected from the crypto market does not take into account that, together with illegal transactions, which many cryptocurrencies facilitate quite easily, conditions for tax avoidance across the economy will arise» — Nabiullina concluded.

The central bank criticized the proposals for regulating the industry in its correspondence with the Ministry of Finance. In particular, the regulator fears risks from shifting control over digital-currency operations to banks.

The Bank of Russia also did not back the proposed division of investors by qualification, arguing that «financial literacy will not protect against the speculative nature of assets».

The draft bill regulating cryptocurrency turnover in Russia is already already in draft form. Its adoption is expected in the first half of 2022.

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